Chapter 9

The limits of discretion? Self-judging emergency clauses

in international investment agreements

Michael D. Nolan and Frédéric G. Sourgens*

The discretion accorded to states by international investment agreements in responding to

(financial) crises is a topic of ongoing debate in this Investment Yearbook and beyond.1 The United

States’ policy response has included “self-judging” clauses in its recent investment treaties. These

clauses provide that each respective treaty does not preclude the United States from applying certain

measures the United States “considers necessary” for the protection of its own essential security

interests. Other capital exporting countries have combined such so-called “self-judging” clauses

with additional mechanisms to carve out certain measures from the protections extended by treaty.

Clauses of this kind have yet to be tested in international investment arbitration.

The arbitral decisions arising out of the 2001–2002 Argentine financial crisis are the first BIT

awards to touch upon the potential effect of “self-judging” clauses.2 All the decisions rejected

Argentina’s contention that the non-precluded measures clause in Argentina’s international

investment treaty with the United States was “self-judging.”3 The decisions nevertheless addressed

the potential effect of “self-judging” clauses: One tribunal stated that such a clause means that “the

* The author wishes to thank two anonymous peer reviewers for their helpful comments.
1
See Anne van Aaken and Jürgen Kurtz, “Emergency measures and international investment law: How far can states
go?,” in Karl P. Sauvant, ed., Yearbook on international investment law and policy 2009–2010 (New York: Oxford
University Press, 2010), pp. 505–537.
2
For a discussion of these cases, see William W. Burke-White, “Part IV Chapter 17: The Argentine financial crisis:
State liability under BITs and the legitimacy of the ICSID system,” in Michael Waibel, Asha Kaushal, et al., eds., The
Backlash against Investment Arbitration (Austin: Kluwer, 2010) pp. 407–432; Stephan W. Schill, “International
investment law and the host state’s power to handle economic crises,” 24 Journal International Arbitration 265 (2007).
3
Enron Corporation and Ponderosa Assets LP v. Argentina, ICSID Case No. ARB/01/3; IIC 441 (2010), decision on
application for annulment (July 30, 2010), at ¶¶ 401–402; Sempra Energy International v. Argentina, ICSID Case No.
ARB/02/16; IIC 438 (2010), decision on Argentina’s application for annulment of the award (June 10, 2010), at ¶ 157;
Sempra Energy International v. Argentina, ICSID Case No. ARB/02/16; IIC 304 (2007), award (September 18, 2007),
at ¶¶ 374–388; CMS Gas Transmission Company v. Argentina, ICSID Case No. ARB/01/8; IIC 303 (2007), decision on
application for annulment (August 21, 2007), at ¶¶ 120–126; Enron Corporation and Ponderosa Assets, LP v.
Argentina, ICSID Case No. ARB/01/3; IIC 292 (2007), award (May 22, 2007), at ¶¶ 332–339; LG&E Energy Corp.,
LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1; 46 ILM 36
(2007), decision on liability (October 3, 2006), at ¶¶ 213–214; CMS Gas Transmission Company v. Argentina, ICSID
Case No. ARB/01/8, IIC 65 (2005), award (May 12, 2005), at ¶¶ 366–373.
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State adopting the measures in question is the sole arbiter of the scope and application of that

rule.”4 Another tribunal concluded that pursuant to such clauses, “each party will be the sole judge

of when the situation requires measures of the kind envisaged by the Article, subject only to a

determination of good faith by tribunals that might be called upon to settle a dispute on this point.”5

This article surveys non-precluded measures clauses in various international investment treaty

programs. After that survey, it addresses two questions: to what extent do “self-judging” non-

precluded measures clauses make the State adopting a measure the sole arbiter whether a measure is

exempted from the treaty? If the State is not literally the sole arbiter, what does it mean for a non-

precluded measures clause to be “self-judging?” The article will conclude that too much has been

made of the term “self-judging.” In the majority of instances, tribunals will be able to review the

invocation of such “self-judging” clauses—the question is how and when. Easy assumptions about

the “self-judging” nature of clauses may place too great an emphasis on labels or shorthand

classifications at the expense of interpreting all the words in a treaty provision at hand. Rather then

rely on the characterization of a clause as “self-judging,” this article concludes, a tribunal will be

required by invocation of such a provision to engage in an application of the treaty in good faith in

its context and in light of its object and purpose.

A. Survey of non-precluded measures clauses

This article is concerned, broadly, with “non-precluded measures clauses,” using the term loosely.

Such clauses can take a variety of forms. For purposes of this study, the article has focused on

clauses that give host States room to address and react to events within the core of their police

powers, or its “sovereignty, security, public policy—or more generally—its essential interests.”6 It

treats such clauses as “non-precluded measures clauses” in order to achieve a wider scope. This is

4
CMS Gas Transmission Company v. Argentina, op. cit., award (May 12, 2005), at ¶ 366 (emphasis added).
5
Sempra Energy International v. Argentina, op. cit., award (September 18, 2007), at ¶ 366 (emphasis added).
6
Stephan Schill and Robyn Briese, “‘If the state considers’: Self-judging clauses in international dispute settlement,” 13
Max Planck Yearbook of United Nations Law 61 (2009), p. 63. In the trade law context, these exceptions at first were
considered to include both essential for security and public morals or human, animal, or plant life in a single exclusions
article. Essential security was only later separated into an independent article. See Wesley A. Cann, “Creating standards
and accountability for the use of the WTO security exception: Reducing the role of power-based relations and
establishing a new balance between sovereignty and multilaterialism,” 26 Yale Journal International Law 413 (2001),
p. 422; but see Andrew Emmerson, “Conceptualizing security exceptions: Legal doctrine or political excuse,” 11
Journal of International Economics Law, 135 (2008), p. 137 (“[t]raditional sovereignty is intimately tied to notions of
‘the inviolability of state borders and decisions about national security interest’ within a state’s domestic sphere.
Sovereignty is ‘the State’s sphere of liberty,’ and in this essay, is defined as the allocation of decision-making power”).
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even though “non-precluded measures clauses” may sometimes be regarded as dealing exclusively

with security issues. The survey below is meant to be illustrative rather than comprehensive.

Treaty programs have approached such non-precluded measures clauses in a variety of ways.

The divergence between the different types of clauses themselves is important to any analysis of

“self-judging” non-precluded measures clauses. It highlights that there is not a uniform standard or

a uniform treaty provision that forms the baseline for interpretation.

Instead, the survey of non-precluded measures clauses shows that treaty programs have adapted

their non-precluded measures clauses over time. The “self-judging” nature of non-precluded

measures clauses was only one aspect of these developments. The “self-judging” nature of these

clauses therefore should not be considered a cure-all employed by treaty drafters. In fact, their

introduction can create more questions of interpretation and, consequently, greater uncertainty than

use of alternative formulations.

Finally, the survey also shows that some terms like “essential security interests” have very

different meanings from treaty program to treaty program, and sometimes from treaty to treaty of

the same State. This again highlights that each non-precluded measures clause must be read as it

stands. Further, the use of similar terms with different definitions requires the reader to be caution

when dealing with these clauses.

1. OECD draft multilateral agreement on investment

The Organisation for Economic Co-operation and Development (OECD) draft Multilateral

Agreement on Investment, although unsuccessful in bringing about a broad multilateral agreement

on investment, has influenced the drafting of bilateral investment treaties (BITs) and similar

bilateral agreements. The OECD draft Multilateral Agreement on Investment contained the

following non-precluded measures:

GENERAL EXCEPTIONS [fn.1]

1. This Article shall not apply to Article IV, 2 and 3 (Expropriation and compensation and protection from
strife).

2. Nothing in this Agreement shall be construed:

a. to prevent any Contracting Party from taking any action which it considers necessary for the protection
of its essential security interests:

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 (i) taken in time of war, or armed conflict, or other emergency in international relations;

(ii) relating to the implementation of national policies or international agreements respecting the non-
proliferation of weapons of mass destruction;

(iii) relating to the production of arms and ammunition;

b. to require any Contracting Party to furnish or allow access to any information the disclosure of which it
considers contrary to its essential security interests;

c. to prevent any Contracting Party from taking any action in pursuance of its obligations under the United
Nations Charter for the maintenance of international peace and security.

3. Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between Contracting Parties, or a disguised investment
restriction, nothing in this Agreement shall be construed to prevent any Contracting Party from taking any
measure necessary for the maintenance of public order. [fn. 2]

4. Actions or measures taken pursuant to this Article shall be notified to the Parties Group.

5. If a Contracting Party (the “requesting Party”) has reason to believe that actions or measures taken by
another Contracting Party (the “other Party”) under this article have been taken solely for economic
reasons, or that such actions or measures are not in proportion to the interest being protected, it may
request consultations with that other Party in accordance with Article V, B.1 (State-State Consultation
Procedures). That other Party shall provide information to the requesting Party regarding the actions or
measures taken and the reasons therefor.”

fn.1: This text was proposed for discussion by the Chairman. It is under consideration by the Negotiating
Group.

fn.2: The public order exception may be invoked only where a genuine and sufficiently serious threat is
7
posed to one of the fundamental interests of society.

The second footnote clarifies the scope of application of the essential security exception. It

contrasts with approaches taken in some other treaties. The OECD clause highlights that a non-

precluded measures clause does not necessarily apply to all protections extended in a treaty. The

terms “essential security interest” and “public order” are open-ended and must be interpreted in

7
OECD, Negotiating Group on the Multilateral Agreement on Investment (MAI), “The Multilateral Agreement On
Investment Draft Consolidated Text,” DAFFE/MAI(98)7/REV1, (April 22, 1998), p. 77, available at:
http://www1.oecd.org/daf/mai/pdf/ng/ng987r1e.pdf (last visited December 12, 2010). The OECD draft also included a
draft proposal concerning environmental exclusions regarding environmental matters allowing the imposition of
performance requirements. It stated as follows:
6. Performance Requirements

4. Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute
a disguised restriction on investment, nothing in paragraphs 1(b) and 1(c) shall be construed to prevent any
Contracting Party from adopting or maintaining measures, including environmental measures:

(a) necessary to secure compliance with measures that are not inconsistent with the provisions of this
Agreement;

(b) necessary to protect human, animal or plant life or health; or

(c) necessary for the conservation of living or non-living exhaustible natural resources.

OECD, “The Multilateral Agreement on Investment Draft Consolidated Text,” op. cit., at pp. 143–144.
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their specific contexts. This particular non-precluded measures mechanism, at least, is a carefully

crafted tool intended to respond to specific risk situations, not a blunt exculpatory tool to be used by

host states at their complete discretion.8

2. United States

The United States’ treaty program is of particular importance for an analysis of “self-judging” non-

precluded measures clauses for three reasons. First, the United States is a leading capital exporter.

Second, recent United States treaties have embraced “self-judging” elements. Third, arbitral awards

interpreting non-precluded measures clauses have focused on United States treaties.

The U.S. treaty program has the best-known non-precluded measures clause: Article XI of the

United States-Argentina BIT. This provision was at issue in, for example, the CMS, LG&E,

Continental Casualty, Sempra, and Enron arbitrations.9 These tribunals held that this provision was

not “self-judging.”10 Article XI of the U.S.-Argentina BIT reads:

This treaty shall not preclude the application by either Party of measures necessary for the maintenance of
public order, the fulfillment of its obligations with respect to the maintenance or restoration of
11
international peace or security, or the Protection of its own essential security interests.

The language in the United States-Argentina Treaty is consistent with the 1992 U.S. Model

BIT.12 United States BITs containing similar text include those with Armenia,13 Bangladesh,14

8
Different treaty programs have borrowed different elements of this provision and developed them further. Others have
rejected the broader framework and use different treaty language.
9
Enron Corporation and Ponderosa Assets LP v. Argentina, op. cit., decision on application for annulment (July 30,
2010); Sempra Energy International v. Argentina, op. cit., decision on Argentina’s application for annulment of the
award (June 10, 2010); Continental Casualty Company v. Argentina, ICSID Case No. ARB/03/9; IIC 336 (2008),
award (September 5, 2008), at ¶¶ 182–188; Sempra Energy International v. Argentina, op. cit., award (September 18,
2007); CMS Gas Transmission Company v. Argentina, op. cit., decision on application for annulment (August 21,
2007); Enron Corporation and Ponderosa Assets, LP v. Argentina, op. cit., award (May 22, 2007); LG&E Energy
Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, op. cit., decision on liability (October
3, 2006); CMS Gas Transmission Company v. Argentina, op. cit., award (May 12, 2005).
10
Enron Corporation and Ponderosa Assets LP v. Argentina, op. cit., decision on application for annulment (July 30,
2010), at ¶¶ 401–402; Sempra Energy International v. Argentina, op. cit., decision on Argentina’s application for
annulment of the award, (June 10, 2010), at ¶ 157; Sempra Energy International v. Argentina, op. cit., award
(September 18, 2007), at ¶¶ 374–388; Continental Casualty Company v. Argentina, op. cit., award (September 5, 2008),
at ¶¶ 160–236; CMS Gas Transmission Company v. Argentina, op. cit., decision on application for annulment (August
21, 2007), at ¶¶ 120–126; Enron Corporation and Ponderosa Assets, LP v. Argentina, op. cit., award (May 22, 2007),
at ¶¶ 332–339; LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, op. cit., decision on liability
(October 3, 2006), at ¶¶ 213–214; CMS Gas Transmission Company v. Argentina, op. cit., award (May 12, 2005), at ¶¶
366–373.
11
Treaty Between United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and
Protection of Investment (1991 U.S.-Argentina BIT), dated September 23, 1992, IC-BT 385 (1992), at Art. X. available
at: http://www.unctad.org/sections/dite/iia/docs/bits/argentina_us.pdf (last visited April 8, 2011).
12
“Model Treaty of the United States of America Concerning the Encouragement and Reciprocal Protection of
Investment,” dated February 1992, in Rudolf Dolzer and Margrete Stevens, Bilateral investment treaties (The Hague;
Kluwer, 1995), at pp. 240–250.
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Bulgaria,15 Cameroon,16 DRC,17 Republic of Congo,18 Croatia,19 Czech,20 Ecuador,21 Egypt,22

Estonia,23 Georgia,24 Granada,25 Honduras,26 Jamaica,27 Kazakhstan,28 Kyrgystan,29 Latvia,30

13
Treaty Between the United States of America and the Republic of Armenia Concerning the Encouragement and
Reciprocal Protection of Investment (1992 U.S.-Armenia BIT), dated September 23, 1992, IC-BT 385 (1992), at Art. X.
available at: http://www.state.gov/documents/organization/43477.pdf, (last visited April 8, 2011).
14
Treaty Between the United States of America and the People’s Republic of Bangladesh Concerning the Reciprocal
Encouragement and Protection of Investment (1986 U.S.-Bangladesh BIT), dated March 12, 1986, IC-BT 388 (1986), at
Art. X, available at: http://www.state.gov/documents/organization/43480.pdf (last visited April 8, 2011)(stating that
“This Treaty shall not preclude the application by either Party of any and all measures necessary for the maintenance of
public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or
security, or the protection of its own essential security interests” (emphasis added)).
15
Treaty Between the United States of America and the Republic of Bulgaria Concerning the Encouragement and
Reciprocal Protection of Investment (1992 U.S.-Bulgaria BIT), dated September 23, 1992, IC-BT 390 (1992) at Art.
X(1), available at: http://www.pca-cpa.org/upload/files/11%20US-Bulg%20BIT.pdf (last visited April 8, 2011).
16
Treaty Between the United States of America and the Republic of Cameroon Concerning the Reciprocal
Encouragement and Protection of Investment (1986 U.S.-Cameroon BIT), dated February 26, 1986, IC-BT 392 (1986),
Art. X(1), available at: http://www.state.gov/documents/organization/43543.pdf (last visited April 8, 2011)(stating that
“This Treaty shall not preclude the application by either Party or any political subdivision thereof of any and all
measures necessary in its territory for the maintenance of public order and morals, the fulfillment of its obligations with
respect to the maintenance or restoration of international peace or security, or the protection of its own essential security
interests” (emphasis added)).
17
Treaty Between the United States of America and the Republic of Zaire Concerning the Reciprocal Encouragement
and Protection of Investment (1984 U.S.-Zaire BIT), dated August 3, 1984, IC-BT 394 (1984) at Art. X(1), available at:
http://www.state.gov/documents/organization/43544.pdf (last visited April 8, 2011)(stating that “This Treaty shall not
preclude the application by either Party of measures necessary in its territory for the maintenance of public order and
morality, the fulfillment of its obligations with respect to the maintenance and restoration of international peace and
security, or the, protection of its own essential security interests” (emphasis added)).
18
Treaty Between the Government of the United States of America and the Government of the People’s Republic of the
Congo Concerning the Reciprocal Encouragement and Protection of Investment (1990 U.S.-Congo BIT), dated
February 12, 1990, IC-BT 393 (1990), at Art. X(1), available at:
http://www.state.gov/documents/organization/43545.pdf (last visited April 8, 2011).
19
Treaty Between the Government of the United States of America and the Government of the Republic of Croatia
Concerning the Encouragement and Reciprocal Protection of Investment (1996 U.S.-Croatia BIT), dated July 13, 1996,
IC-BT 395 (1996), at Art. XV(1), available at: http://www.state.gov/documents/organization/43556.pdf (last visited
April 8, 2011).
20
Treaty between the United States of America and the Czech and Slovak Federal Republic Concerning the Reciprocal
Encouragement and Protection of Investments (1991 U.S.-Czech and Slovak Federal Republic BIT), dated October 22,
1991, IC-BT 611 (1991), at Art. X, available at:
http://www.unctad.org/sections/dite/iia/docs/bits/US_Czech_protocol.pdf (last visited April 8, 2011).
21
Treaty Between the United States of America and the Republic of Ecuador Concerning the Encouragement and
Reciprocal Protection of Investment (1993 U.S.-Ecuador BIT), dated August 27, 1993, IC-BT 398 (1993), at Art. IX(1),
available at: http://www.state.gov/documents/organization/43558.pdf (last visited April 8, 2011).
22
Treaty Between the United States of America and the Arab Republic of Egypt Concerning the Reciprocal
Encouragement and Protection of Investments (1982 U.S.-Egypt BIT), dated September 29, 1982, IC-BT 399 (1982), at
Art. X(1), available at: http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_002813.asp (last visited
April 8, 2011)(stating that “This Treaty shall not preclude the application by either Party or any subdivision thereof of
any and all measures necessary for the maintenance of public order and morals, the fulfillment of its existing
international obligations, the protection of its own security interests, or such measures deemed appropriate by the
Parties to fulfill future international obligations,” (emphasis added)).
23
Treaty Between the Government of the United States of America and the Government of the Republic of Estonia
Concerning the Encouragement and Reciprocal Protection of Investment (1994 U.S.-Estonia BIT), dated April 19,
1994, IC-BT 401 (1994), at Art. IX(1), available at: http://www.state.gov/documents/organization/43560.pdf (last
visited April 8, 2011).
24
Treaty Between the Government of the United States of America and the Government of the Republic of Georgia
Concerning the Encouragement and Reciprocal Protection of Investment (1994 U.S.-Georgia BIT), dated March 7,
1994, IC-BT 403 (1994), at Art. XIV(1), available at: http://www.state.gov/documents/organization/43561.pdf (last
visited April 8, 2011).
25
Treaty Between the United States of America and Grenada Concerning the Reciprocal Encouragement and Protection
of Investment (1986 U.S.-Grenada BIT), dated May 2, 1986, IC-BT 404 (1986), at Art. X, available at:
http://www.state.gov/documents/organization/43562.pdf (last visited April 8, 2011)(stating that “This Treaty shall not
preclude the application by either Party of measures necessary in its jurisdiction for the maintenance of public order, the
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Lithuania,31 Moldova,32 Mongolia,33 Morocco,34 Panama,35 Poland,36 Romania,37 Senegal,38 Sri

Lanka,39 Tunisia,40 Turkey,41 and Ukraine.42 Even though the provisions are broadly consistent,

fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the
protection of its own essential security interests” (emphasis added)).
26
Treaty Between the Government of the United States of America and Government of the Republic of Honduras
Concerning the Encouragement and Reciprocal Protection of Investment (1995 U.S.-Honduras BIT), dated July 1, 1995,
IC-BT 405 (1995), at Art. XIV(1), available at: http://www.state.gov/documents/organization/43563.pdf (last visited
April 8, 2011).
27
Treaty Between the Government of the United States of America and Jamaica Concerning the Reciprocal
Encouragement and Protection of Investment (1994 U.S.-Jamaica BIT), dated February 4, 1994, IC-BT 406 (1994), at
Art. X(1), available at: http://www.state.gov/documents/organization/43564.pdf (last visited April 8, 2011)(stating that
“This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public
order, the fulfillment of its obligations under the Chapter of the United Nations with respect to the maintenance or
restoration of international peace or security, or the protection of its own essential security interests” (emphasis added)).
28
Treaty Between the United States of America and the Republic of Kazakhstan Concerning the Reciprocal
Encouragement and Protection of Investment (1992 U.S.-Kazakhstan BIT), dated May 19, 1992, IC-BT 408 (1992), at
Art. X(1), available at: http://www.state.gov/documents/organization/43566.pdf (last visited April 8, 2011).
29
Treaty Between the United States of America and the Republic of Kyrgyzstan Concerning the Encouragement and
Reciprocal Protection of Investment (1993 U.S.-Kyrgyzstan BIT), dated January 19, 1993, IC-BT 409 (1993), at Art.
X(1), available at: http://www.state.gov/documents/organization/43567.pdf (last visited April 8, 2011).
30
Treaty Between the Government of the United States of America and the Government of the Republic of Latvia
Concerning the Encouragement and Reciprocal Protection of Investment (1995 U.S.-Latvia BIT), dated January 13,
1995, IC-BT 619 (1995), at Art. IX(1), available at: http://www.state.gov/documents/organization/43568.pdf (last
visited April 8, 2011).
31
Treaty Between the Government of the United States of America and the Government of the Republic of Lithuania
for the Encouragement and Reciprocal Protection of Investment (1998 U.S.-Lithuania BIT), dated January 14, 1998, IC-
BT 621 (1998), at Art. IX(1), available at:
http://tcc.export.gov/Trade_Agreements/Exporters_Guides/List_All_Guides/TOA_LithuaniaBIT.asp (last visited April
8, 2011).
32
Treaty Between the United States of America and the Republic of Moldova Concerning the Encouragement and
Reciprocal Protection of Investment (1993 U.S.-Moldova BIT), dated April 21, 1993, IC-BT 622 (1993), at Art. IX(1),
available at: http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005862.asp (last visited April 8,
2011).
33
Treaty Between the United States of America and Mongolia Concerning the Encouragement and Reciprocal
Protection of Investment (1994 U.S.-Mongolia BIT), dated October 6, 1994, IC-BT 623 (1994), at Art. X(1), available
at: http://www.state.gov/documents/organization/43579.pdf (last visited April 8, 2011).
34
Treaty Between the United States of America and the Kingdom of Morocco Concerning the Encouragement and
Reciprocal Protection of Investment (1985 U.S.-Morocco BIT), dated July 22, 1985, IC-BT 624 (1985), at Art. IX(1),
available at: http://www.state.gov/documents/organization/43580.pdf (last visited April 8, 2011)(stating that “This
Treaty shall not preclude the application by either Party in its territory of the domestic measures necessary for the
maintenance of public order and morality or the protection of peace and international security or its own essential
security interests” (emphasis added)).
35
Treaty Between the United States of America and the Republic of Panama Concerning the Treatment and Protection
of Investments (1982 U.S.-Panama BIT), dated October 27, 1982, IC-BT 627 (1982), at Art. X(1), available at:
http://www.state.gov/documents/organization/43582.pdf (last visited April 8, 2011)(stating that “This treaty shall not
preclude the application by either Party of any and all measures necessary for the maintenance of public order, the
fulfillment of its obligations with respect to the maintenance or restoration of international peace and security, or the
production of its own essential security interests.” (emphasis added)).
36
Treaty Between the United States of America and the Republic of Poland Concerning Business and Economic
Relations with Protocol and Four Related Exchanges of Letters, dated March 21, 1990, at Art. XII(4), available at:
http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005367.asp (last visited April 8, 2011).
37
Treaty Between the Government of the United States of America and the Government of Romania Concerning the
Reciprocal Encouragement and Protection of Investment (1992 U.S.-Romania BIT), dated May 28, 1992, at Art. X(1),
available at: http://www.state.gov/documents/organization/43584.pdf (last visited April 8, 2011).
38
Treaty Between the Government of the United States of America and the Republic of Senegal Concerning the
Reciprocal Encouragement and Protection of Investment (1983 U.S.-Senegal BIT), IC-BT 631 (1983), at Art. X(1),
available at: http://www.state.gov/documents/organization/43585.pdf (last visited April 8, 2011)(stating that “Treaty
shall not preclude the application by either Party of any and all measures necessary for the maintenance of public order
and morals, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or
security, or the protection of its own essential security interests.” (emphasis added)).
39
Treaty Between the United States of America and the Democratic Republic of Sri Lanka Concerning the
Encouragement and Reciprocal Protection of Investment (1991 U.S.-Sri Lanka BIT), dated September 20, 1991, IC-BT
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there are differences in the scope of the exceptions, and each provision will have to be considered

on its own merits.

United States’ treaties with other countries concluded in the mid- to late-1990s contain similar,

but somewhat different, language. The U.S.-Albania BIT, for example, provides that

This Treaty shall not preclude a Party from applying measures necessary for the fulfillment of its
obligations with respect to the maintenance or restoration of international peace or security, or the
43
protection of its own essential security interests.

The U.S.-Azerbaijan BIT,44 U.S.-Bolivia BIT,45 U.S.-Jordan BIT,46 U.S.-Trinidad and Tobago

BIT,47 also contain such provisions. This provision would not be “self-judging” according to the

reasoning of the ICSID decision interpreting the U.S.-Argentina BIT. But a conclusion such as this,

even on the reasoning of the award applying the U.S.-Argentina BIT, would have to be tested

against each treaty in light of the context of the provision, the object and purpose of the treaty and

subsequent agreements between the contracting parties, if any.

An important change occurred in the United States treaty program after conclusion of the United

States-Mozambique in 1998. That treaty provides:

632 (1991), at Art. X(1), available at: http://www.state.gov/documents/organization/43588.pdf (last visited April 8,
2011).
40
Treaty Between the United States of America and the Republic of Tunisia Concerning the Reciprocal Encouragement
and Protection of Investment (1990 U.S.-Tunisia BIT), dated May 15, 1990, IC-BT 634 (1990), at Art. X(1), available
at: http://www.state.gov/documents/organization/43614.pdf (last visited April 8, 2011).
41
Treaty Between the United States of America and the Republic of Turkey Concerning the Reciprocal Encouragement
and Protection of Investments (1985 U.S.-Turkey BIT), dated December 3, 1985, IC-BT 634 (1985), at Art. X(1),
available at: http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005487.asp (last visited April 8,
2011).
42
Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection
of Investment (1994 U.S.-Ukraine BIT), dated March 4, 1994, IC-BT 636 (1994), at Art. IX(1), available at:
http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005484.asp (last visited April 8, 2011).
43
The Treaty Between the Government of the United States of America and the Government of the Republic of Albania
Concerning the Encouragement and Reciprocal Protection of Investment (1995 U.S.-Albania BIT), dated January 11,
1995, IC-BT 383, at Art. XIV(1), available at: http://www.state.gov/documents/organization/43474.pdf (last visited
April 8, 2011).
44
Treaty Between the Government of the United States of America and the Government of the Republic of Azerbaijan
Concerning the Encouragement and Reciprocal Protection of Investment (1997 U.S.-Azerbaijan BIT), dated August 1,
1997, IC-BT 386 (1997), at Art. XIV(1), available at: http://www.state.gov/documents/organization/43478.pdf (last
visited April 8, 2011).
45
Treaty Between the Government of the United States of America and the Government of the Republic of Bolivia
Concerning the Encouragement and Reciprocal Protection of Investment (1998 U.S.-Bolivia BIT), dated April 17, 1998,
IC-BT 389 (1998), at Art. XIV(1), available at: http://www.state.gov/documents/organization/43541.pdf (last visited
April 8, 2011).
46
Treaty Between the Government of the United States of America and the Government of the Hashemite Kingdom of
Jordan Concerning the Encouragement and Reciprocal Protection of Investment (1997 U.S.-Jordan BIT), dated July 2,
1997, IC-BT 407 (1997), at Art. XIV(1), available at: http://www.state.gov/documents/organization/43565.pdf (last
visited April 8, 2011).
47
Treaty Between the United States of America and the Government of the Republic of Trinidad and Tobago
Concerning the Encouragement and Reciprocal Protection of Investment (1994 U.S.-Trinidad and Tobago BIT), dated
September 26, 1994, IC-BT 633 (1994), at Art. XIV(1), available at:
http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005559.asp (last visited April 8, 2011).
Electronic copy available at: https://ssrn.com/abstract=3055968
 This Treaty shall not preclude a Party from applying measures that it considers necessary for the
fulfillment of its obligations with respect to the maintenance or restoration of international peace or
48
security, or the protection of its own essential security interests.

The addition of the language “that it considers necessary” is commonly said to result in a “self-

judging” clause.49 United States investment treaties containing similar text include the BITs with

Bahrain, concluded in 1999,50 with Uruguay, concluded in 2005,51 and with Rwanda, concluded in

2008, as well as the free trade agreements with Chile, concluded in 2003,52 Singapore, concluded in

2003,53 CAFTA, concluded in 2004,54 Peru, concluded in 2006,55 Oman, concluded in 2006,56

Colombia,57 Korea,58 and Panama, concluded in 2007.59 This provision is also included in the 2004

U.S. Model BIT.60

48
Treaty Between the Government of the United States of America and the Government of Mozambique Concerning
the Encouragement and Reciprocal Protection of Investment (1998 U.S.-Mozambique BIT), dated December 1, 1998,
IC-BT 625 (1998), at Art. XIV(1), available at:
http://tcc.export.gov/Trade_Agreements/Exporters_Guides/List_All_Guides/exp_002668.asp (last visited April 8, 2011)
(emphasis added).
49
See Schill, “International investment law and the host state’s power to handle economic crises,” op. cit.; compare,
Case Concerning Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of
America), merits, 1986 I.C.J. 14, at p. 131.
50
Treaty Between the Government of the United States of America and the Government of the State of Bahrain
Concerning the Encouragement and Reciprocal Protection of Investment (1999 U.S.-Bahrain BIT), dated September 29,
1999, IC-BT 387 (1999), at Art. 14(1), available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/tifa/asset_upload_file168_7735.pdf (last visited April 8,
2011).
51
Treaty Between the United States of America and the Oriental Republic of Uruguay Concerning the Encouragement
and Reciprocal Protection of Investment (2005 U.S.-Uruguay BIT), dated November 4, 2005, at Art. 18(2), available at:
http://tcc.export.gov/static/Uruguay-11.4.05.pdf (last visited April 8, 2011).
52
U.S.-Chile Free Trade Agreement (2003 U.S.-Chile FTA), dated June 6, 2003, at Art. 23.2, available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/fta/chile/asset_upload_file251_4017.pdf (last visited April 8,
2011) (stating that “to preclude a Party from applying measures that it considers necessary for the fulfillment of its
obligations under the United Nations Charter with respect to the maintenance or restoration of international peace or
security, or the protection of its own essential security interests” (emphasis added)).
53
U.S.-Singapore Free Trade Agreement (2003 U.S.-Singapore FTA), dated May 6, 2003, at Art. 21.2, available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/fta/singapore/asset_upload_file708_4036.pdf (last visited
April 8, 2011).
54
Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA), dated August 5, 2004, at
Art. 21.2, available at: http://www.ustr.gov/sites/default/files/uploads/agreements/cafta/asset_upload_file16_3941.pdf
(last visited April 8, 2011).
55
U.S.-Peru Trade Promotion Agreement (2006 U.S.-Peru TPA), dated April 12, 2006, at Art. 22.2 fn. 2, available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/fta/peru/asset_upload_file841_9542.pdf (last visited April 8,
2011) (stating that “For greater certainty, if a Party invokes Article 22.2 in an arbitral proceeding initiated under
Chapter Ten (Investment) or Chapter Twenty-One (Dispute Settlement), the tribunal or panel hearing the matter shall
find that the exception applies.” (emphasis added)).
56
Agreement between the Government of the United States of America and the Government of the Sultanate of Oman
on the Establishment of a Free Trade Area (2006 U.S.-Oman FTA), dated January 19, 2006, at Art. 21.2, available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/fta/oman/asset_upload_file397_8846.pdf (last visited April
8, 2011). This provision does not contain a provision similar to 2006 U.S.-Peru TPA, Art. 22.2, fn. 2.
57
U.S.-Colombia Free Trade Agreement (2006 U.S.-Colombia FTA 2006), dated November 22, 2006, at Art. 22.2, fn.
2, available at: http://www.ustr.gov/sites/default/files/uploads/agreements/fta/colombia/asset_upload_file770_10193.pdf
(last visited April 8, 2011)(stating that “For greater certainty, if a Party invokes Article 22.2 in an arbitral proceeding
initiated under Chapter 10 (Investment) or Chapter 21 (Dispute Settlement), the tribunal or panel hearing the matter
shall find that the exception applies.” (emphasis added)).
58
Draft U.S.-Republic of Korea (KORUS) Free Trade Agreement, at Article 23.2, fn. 2 available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/fta/korus/asset_upload_file476_12722.pdf (last visited May
1, 2011) (full text available at: http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text) (last
Electronic copy available at: https://ssrn.com/abstract=3055968
 Although the wording in the non-precluded measures clauses in United States BITs changed

dramatically in BITs and FTAs following, or working off, the 1998 Mozambique BIT, subtle

differences may have an important impact on how particular clauses operate. The specific wording

may vary what kind of action falls within the preclusion. To the extent that certain terms are not

used in a particular clause, it may be argued that more limited coverage than might be available

under other treaties is intended.

a. Japan

Japan is an important capital exporting country that has taken a different approach from the United

States to non-precluded measures provisions. The fist Japanese treaty to contain a non-precluded

measures clause was the 1988 treaty between Japan and China, stating as follows:

3. For the purpose of the provisions of paragraph 2 of Article 3 of the Agreement, it shall not be deemed
“treatment less favourable” for either Contracting Party to accord discriminatory treatment, in accordance
with its applicable laws and regulations, to nationals and companies of the other Contracting Party, in case
it is really necessary for the reason of pubic [sic] order, national security or sound development of national
61
economy.

Although facially a limited provision, the treaty does not expressly contain a fair and equitable

treatment protection.62 A clause permitting preferential treatment of home-State nationals in case of

necessity therefore is potentially significant.

The 2002 Japan-Republic of Korea BIT contains two public emergency provisions. The first is a

typical non-precluded measures provision, using an “it considers necessary” formulation with

regard to essential security interests, but not with regard to other elements of the clause:

visited May 1, 2011) (stating that “For greater certainty, if a Party invokes Article 23.2 in an arbitral proceeding
initiated under Chapter 11 (Investment) or Chapter 22 (Dispute Settlement), the tribunal or panel hearing the matter
shall find that the exception applies.” (emphasis added)).
59
United States-Panama Trade Promotion Agreement (2007 U.S.-Panama TPA), dated June 28, 2007, at Art. 21.2, fn.
2, available at: http://www.ustr.gov/sites/default/files/uploads/agreements/fta/panama/asset_upload_file794_10401.pdf
(last visited April 8, 2011)(stating that “For greater certainty, if a Party invokes Article 21.2 in an arbitral proceeding
initiated under Chapter 10 (Investment) or Chapter 21 (Dispute Settlement), the tribunal or panel hearing the matter
shall find that the exception applies.” (emphasis added)).
60
2004 U.S. Model BIT, Art. 18(2), available at: http://www.state.gov/documents/organization/117601.pdf (last visited
April 8, 2011).
61
Agreement between the People’s Republic of China and Japan concerning the Encouragement and Reciprocal
Protection of Investments (1988 China-Japan BIT), dated August 27, 1988, IC-BT 482 (1988), at Protocol ad 3,
available at: http://untreaty.un.org/unts/60001_120000/25/29/00049408.pdf (last visited April 8, 2011).
62
Articles 2(2), 3, 4, 5(1) and 6 contain the treatment protections in the China-Japan BIT 1988, op. cit. Article 2(2)
extends most favored nations treatment in respect of the admission of investment and matters in connection therewith.
Article 3 accords investments most favored nation treatment with respect to the investment (Article 3(1)) and national
treatment (Article 3(2)). Article 4 extends national treatment and most favored nation treatment with regard to access to
courts. Article 5(1) extends most constant protection and security protections. Article 6 extends national treatment
protections for wartime and other emergency damage.
Electronic copy available at: https://ssrn.com/abstract=3055968
 1. Notwithstanding any other provisions in this Agreement other than the provisions of Article 11, each
Contracting Party may:

(a) take any measure which it considers necessary for the protection of its essential security interests;

(i) taken in time of war, or armed conflict, or other emergency in that Contracting Party or in international
relations; or

(ii) relating to the implementation of national policies or international agreements respecting the non-
proliferation of weapons;

(b) take any measure in pursuance of its obligations under the United Nations Charter for the maintenance
of international peace and security;

(c) take any measure necessary to protect human, animal or plant life or health; or

(d) take any measure necessary for the maintenance of public order. The public order exceptions may be
invoked only where a genuine and sufficiently serious threat is posed to one of the fundamental interests
of society.

2. In cases where a Contracting Party takes any measure, pursuant to paragraph 1 above, that does not
conform with the obligations of the provisions of this Agreement other than the provisions of Article 11,
that Contracting Party shall not use such measure as a means of avoiding its obligations.

3. In cases where a Contracting Party takes any measure, pursuant to paragraph 1 above, that does not
conform with the obligations of the provisions of this Agreement other than the provisions of Article 11,
that Contracting Party shall, prior to the entry into force of the measure or as soon thereafter as possible,
notify the other Contracting Party of the following elements of the measure: (a) sector and sub-sector or
matter; (b) obligation or article in respect of which the measure is taken; (c) legal source or authority of
63
the measure; (d) succinct description of the measure; and (e) motivation or purpose of the measure.

The second is a limited “prudential measures” provision:

1. Notwithstanding any other provisions of this Agreement, a Contracting Party may adopt or maintain
prudential measures with respect to financial services, including measures for the protection of investors,
depositors, policy holders or persons to whom a fiduciary duty is owed by an enterprise providing
financial services, to ensure the integrity and stability of its financial system.

2. In cases where a Contracting Party takes any measure, pursuant to paragraph 1 above, that does not
conform with the obligations of the provisions of this Agreement, that Contracting Party shall not use such
64
measure as a means of avoiding its obligations.

This prudential measures provision expressly addresses the financial services sector.65 This

clause is of potential importance because it shows that some treaties address the financial system

outside of essential security clauses whereas others, on their face, would not. This difference may

have interpretive implications for the interpretation of other Japanese treaties (and may also be used

as a point of comparison in interpreting the scope of non-precluded measures clauses in treaties to

63
Agreement between the Government of Japan and the Government of the Republic of Korea for the Liberalization,
Promotion and Protection of Investment (2002 Japan-Republic of Korea BIT), dated May 22, 2002, IC-BT 855 (2002),
at Art. 16, available at: http://www.unctad.org/sections/dite/iia/docs/bits/korea_japan.pdf (last visited April 8, 2011).
64
2002 Japan-Republic of Korea BIT, op. cit., at Art. 18.
65
2002 Japan-Republic of Korea BIT, op. cit., at Art. 18.
Electronic copy available at: https://ssrn.com/abstract=3055968
which Japan is not a party). The same provisions are included in Japanese BITs with Vietnam,66 and

Lao.67 Further, the treaty between Japan and Cambodia contains the same prudential measures

provision without a corresponding non-precluded measures provision.68

b. China

China’s treaty program historically did not contain non-precluded measures clauses,69 but China’s

treaties with Belgium,70 New Zealand (1988 BIT and 2008 FTA),71 Japan,72 Philippines73 and

Finland74 do. The new draft Chinese Model BIT also contains a detailed non-precluded measures

clause,75 so future Chinese BITs may also contain non-precluded measures clauses.

66
Agreement between Japan and the Socialist Republic of Vietnam for the Liberalization, Promotion and Protection of
Investment (2003 Japan-Vietnam BIT), dated November 14, 2003, IC-BT 859 (2003), at Arts. 15, 17, available at:
http://www.mofa.go.jp/region/asia-paci/vietnam/agree0311.pdf, (last visited April 8, 2011).
67
Agreement between Japan and the Lao People’s Democratic Republic for the Liberalization, Promotion and
Protection of Investment (2008 Japan-Lao BIT), dated January 16, 2008, IC-BT 861 (2007), at Arts. 18, 20, available at:
http://www.mofa.go.jp/region/asia-paci/laos/agree0801.pdf (last visited April 8, 2011).
68
Agreement between Japan and the Kingdom of Cambodia for the Liberalization, Promotion and Protection of
Investment (2007 Japan-Cambodia BIT), dated June 14, 2007, IC-BT 860 (2007), at Art. 20, available at:
http://www.kh.emb-japan.go.jp/political/nikokukan/invest-agree.pdf (last visited April 8, 2011).
69
Government of the People’s Republic of China, “Appendix II: Chinese Model BIT Version I,” “Appendix III:
Chinese Model BIT Version II,” and “Appendix IV: Chinese Model BIT Version III (Current),” in Norah Gallagher and
Wenhua Shan, Chinese Investment Treaties (New York: Oxford University Press, 2009), pp. 421–451 (referring to a
“state of national emergency” only in the context of the political violence or war loss provision without also containing
a non-precluded measures clause in Article 5 of each model treaty).
70
The essential security provision of the China-Belgium BIT is quoted in the context of the Belgian BIT program.
71
New Zealand and China Agreement on the Promotion and Protection of Investments (1988 China-New Zealand BIT),
dated November 22, 1988, at Art. 11, available at:
http://www.unctad.org/sections/dite/iia/docs/bits/china_newzealand.pdf (last visited April 8, 2011); New Zealand-China
Free Trade Agreement, dated April 7, 2008, at Arts. 200–203, available at: http://www.chinafta.govt.nz/1-The-
agreement/2-Text-of-the-agreement/18-Chapt-17-Exceptions/index.php (last visited April 8, 2011).
72
The essential security provision of the China-Japan BIT is quoted in the context of the Japanese BIT program.
73
Agreement between the Government of the People’s Republic of China and the Government of the Republic of the
Philippines concerning the Encouragement and Reciprocal Protection of Investments (1992 China-Philippines BIT),
dated July 20, 1992, IC-BT 458 (1992), available at: http://www.unctad.org/sections/dite/iia/docs/bits/korea_china.pdf
(last visited April 8, 2011).
74
Agreement between the Government of the Republic of Finland and the Government of the People’s Republic of
China for the Encouragement and Reciprocal Protection of Investments (2004 Finland-China BIT), dated November 15,
2004, at Art. 3(6), available at: http://en.cnci.gov.cn/Culture/CultureDetail.aspx?ID=6839&p=3 (last visited April 8,
2011).
75
See “Appendix V: Chinese Draft New Model BIT,” in Norah Gallagher and Wenhua Shan, Chinese Investment
Treaties, op. cit., pp. 439–451. The clause is part of draft Article 12, “Exceptions”:
1. Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between investments or between investors, or a
disguised restriction on international investment, nothing in this Agreement shall be construed to prevent a
Party from adopting or enforcing measures necessary:

to protect public morals or maintain public order;

to protect human, animal or plant life or health;

to secure compliance with laws and regulations that are not inconsistent with the provisions of this
Agreement;

for the protection of national treasures of artistic, historic or archeological value; or

Electronic copy available at: https://ssrn.com/abstract=3055968

 The China-Philippines BIT limits the definition of “investor” by reference to public order:

Provided that any particular company may be excluded from the foregoing definition by mutual agreement
between the Contracting Parties on the grounds of the need to maintain public order, to protect essential
76
security interest or to fulfill commitments relating to international peace and security.

The China-Finland BIT limits the treatment protections extended in the BIT by reference to public

order:

Provided that such measures are not applied in a manner which would constitute a means of arbitrary or
unjustifiable discrimination by a Contracting Party, or a disguised investment restriction, nothing in this
Agreement shall be construed as preventing the Contracting Parties from taking any measures necessary
77
for the maintenance of public order.

The earlier China-New Zealand BIT does not require measures to be “necessary”:

The provisions of this Agreement shall not in any way limit the right of either Contracting Party to apply
prohibitions or restrictions of any kind or take any other action directed to the protection of its essential
security interests, or to the protection of public health or the prevention of disease and pests in animals or
78
plants.

for the protection of the environment.

2. Nothing in this Agreement shall be construed:

1) to require any Party to furnish any information, the disclosure of which it considers contrary to its
essential security interests; or

2) to prevent any Party from taking any action which it considers necessary for the protection of its
essential security interests:

a) relating to investment in the defence and security sector[s]’

b) relating to fissionable and fusionable materials or the materials from which they are derived;

c) taken in time of war or other emergency in international relations; or

3) to prevent any Party from taking any action in pursuance of its obligations for the maintenance of
international peace and security, including under the United Nations Charter.

...

4. Notwithstanding any other provision of this Agreement, a Party shall not be prevented from taking
measures for prudential reasons, including for the protection of investors, depositors, policy holders or
persons to whom a fiduciary duty is owed by a financial service supplier, to ensure the integrity and
stability of the financial system, or to enhance market competition, including ownership and control
limitations.

Where such measures do not conform with the provisions of this Agreement, they shall not be used as a
means of avoiding the Party’s commitments or obligations under this Agreement.
76
1992 China-Philippines BIT, op. cit., at .Art. 1(b).
77
2004 Finland-China BIT, op. cit., at Art. 3(6).
78
1998 China-New Zealand BIT, op. cit. at Article 11. The 2008 FTA between the two countries modifies this language
significantly. It states in relevant part as follows:
Article 200 General Exceptions

Electronic copy available at: https://ssrn.com/abstract=3055968

 1. For the purposes of this Agreement, Article XX of GATT 1994 and its interpretative notes and Article
XIV of GATS (including its footnotes) are incorporated into and made part of this Agreement, mutatis
mutandis.

2. The Parties understand that the measures referred to in Article XX(b) of GATT 1994 and Article
XIV(b) of GATS, as incorporated into this Agreement, can include environmental measures necessary to
protect human, animal or plant life or health, and Article XX(g) of GATT 1994, as incorporated into this
Agreement, applies to measures relating to the conservation of living and non-living exhaustible natural
resources, subject to the requirement that they are not applied in a manner which would constitute a means
of arbitrary or unjustifiable discrimination or a disguised restriction on trade in goods or services or
investment.

3. For the purposes of this Agreement, subject to the requirement that such measures are not applied in a
manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties
where like conditions prevail, or a disguised restriction on trade in goods or services or investment,
nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of
measures necessary to protect national works or specific sites of historical or archaeological value, or to
support creative arts of national value.

[. . .]

Article 201 Security Exceptions

1. Nothing in this Agreement shall be construed:

a.to require a Party to furnish or allow access to any information the disclosure of which it determines to
be contrary to its essential security interests;

b.to prevent a Party from taking any actions which it considers necessary for the protection of its essential
security interests

i. relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and
materials or relating to the supply of services as carried on, directly or indirectly, for the purpose of
supplying or provisioning a military establishment;

ii. taken in time of war or other emergency in international relations;

iii. relating to fissionable and fusionable materials or the materials from which they are derived; or

c. to prevent a Party from taking any action in pursuance of its obligations under the United Nations
Charter for the maintenance of international peace and security.

2. The FTA Joint Commission shall be informed to the extent possible of measures taken under
subparagraphs 1(b) and 1(c) and of their termination.

...

Article 203 Prudential Measures

Notwithstanding any other provisions of this Agreement, a Party shall not be prevented from taking
measures for prudential reasons, including for the protection of investors, depositors, policy holders or
persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and
stability of the financial system. Where such measures do not conform with the provisions of this
Agreement, they shall not be used as a means of avoiding the Party’s commitments or obligations under
this Agreement.

New Zealand and China Free Trade Agreement, op. cit., at Arts. 200–203.
Electronic copy available at: https://ssrn.com/abstract=3055968
 Existing Chinese treaties thus are quite diverse with respect to non-precluded measures and

underscores that each treated will have to be carefully examined in order to understand the intended

scope of a potentially applicable non-precluded measures clause. It remains to be seen whether

China’s treaties will become more uniform on this point.

c. India

Many of India’s bilateral investment treaties contain several variations on the same basic non-

precluded measures clause. The India-Czech Republic BIT states:

The provisions of this Agreement shall not in any way limit the right of either Contracting Party in cases
of extreme emergency to take action in accordance with its laws applied in good faith, on a non-
discriminatory basis, and only to the extent and duration necessary for the protection of its essential
79
security interests, or for the prevention of diseases and pests in animals or plants.

India’s treaties with Australia,80 Austria,81 Croatia,82 Denmark,83 Egypt,84 France,85 Germany,86

Mexico,87 Hungary,88 Indonesia,89 Republic of Korea,90 Mauritius,91 Morocco,92 the Netherlands,93

79
Agreement between the Czech Republic and the Republic of India for the Promotion and Protection of Investments
(1996 Czech Republic-India BIT), dated October 11, 1996, IC-BT 564 (1996), at Art. 12, available at
http://www.unctad.org/sections/dite/iia/docs/bits/czech_india.pdf (last visited April 8, 2011).
80
Agreement between the Government of Australia and the Government of the Republic of India on the Promotion and
Protection of Investments (1999 Australia-India BIT), dated February 26, 1999, at Art. 15, available at:
http://www.unctad.org/sections/dite/iia/docs/bits/australia_india.pdf (last visited April 8, 2011)(stating that “[n]othing
in this Agreement precludes the host Contracting Party from taking, in accordance with its laws applied reasonably and
on a non-discriminatory basis, measures necessary for the protection of its own essential security interests or for the
prevention of diseases or pests”).
81
Agreement between the Government of the Republic of Austria and the Government of the Republic of India for the
Promotion and Protection of Investments (1999 Austria-India BIT), dated November 8, 1999, at Art. 12(2), available at:
http://untreaty.un.org/unts/144078_158780/13/1/5049.pdf (last visited April 8, 2011)(stating that “[n]othing in this
Agreement precludes the host Contracting Party from taking necessary action in abnormal circumstances for the
protection of its essential security interests or in circumstances of extreme emergency in accordance with its laws
applied on a non discriminatory basis”).
82
Agreement between the Government of the Kingdom of Denmark and the Government of the Republic of India
Concerning the Promotion and Reciprocal Protection of Investments (1995 Denmark-India BIT), dated September 5,
1995, at Art. 12(2), available at: http://untreaty.un.org/unts/120001_144071/6/6/00004713.pdf (last visited April 8,
2011)(stating that “[n]othing in this Agreement precludes the host Contracting Party from taking necessary measures in
accordance with its laws normally and reasonably applied on a nondiscriminatory basis, in circumstances of extreme
emergency for the prevention of diseases or pests”).
83
Agreement Between the Government of the Republic of Croatia and the Government of the Republic of India on the
Promotion and Reciprocal Protection of Investments (2001 India-Croatia BIT), dated May 4, 2001, at Art. 12(2),
available at: http://www.unctad.org/sections/dite/iia/docs/bits/croatia_india.pdf (last visited April 8, 2011).
84
Agreement Between the Government of the Arab Republic of Egypt and the Government of the Republic of India on
the Promotion and Reciprocal Protection of Investments (1997 India-Egypt BIT), at Art. 11(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/egypt_india.pdf (last visited April 8, 2011).
85
Agreement between the Government of the French Republic and the Government of the Republic of India on the
Encouragement and Reciprocal Protection of Investments (1997 France-India BIT), dated September 2, 1997, at Art.
12.
86
Agreement between the Federal Republic of Germany and the Republic of India for the Promotion and Protection of
Investments (1995 Germany-India BIT), dated July 10, 1995, at Art. 12, available at:
http://untreaty.un.org/unts/144078_158780/9/4/2580.pdf (last visited April 8, 2011)(stating that “[n]othing in this
Agreement shall prevent either Contracting Party from applying prohibitions or restrictions to the extent necessary for
the protection of its essential security interests, or for the prevention of diseases and pests in animals or plants”).
Electronic copy available at: https://ssrn.com/abstract=3055968
Oman,94 Poland,95 Portugal,96 Spain,97 Sri Lanka,98 Sweden,99 Switzerland,100 Thailand,101

Turkey,102 and the United Kingdom103 contain similar (or typical) clauses.

The important significant outliers are the treaties between India and Greece, Italy, Kazakhstan,

and Singapore. The India-Greece BIT states:

87
Agreement between the United Mexican States and the Government of the Republic of India on the Promotion and
Reciprocal Protection of Investments (2007 India-Mexico BIT), dated May 21, 2007, IC-BT 742 (2007), at Art. 31,
available at: http://www.investmentclaims.com/subscriber_article?script=yes&id=/ic/BITs/law-iic-
bt742&recno=10&country=India (last visited: April 8, 2011).
88
Agreement Between the Republic of Hungary and the Republic of India for the Promotion and Protection of
Investments (2003 India-Hungary BIT), dated November 3, 2003, at Art. 12(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/hungary_india.PDF (last visited April 8, 2011).
89
Agreement between the Government of the Republic of Indonesia and the Government of the Republic of India on
the Encouragement and Reciprocal Protection of Investments (1999 India-Indonesia BIT), dated February 8, 1999, at
Art. 12(2), available at: http://www.unctad.org/sections/dite/iia/docs/bits/indonesia_india.pdf (last visited April 8,
2011).
90
Agreement Between the Government of the Republic of India and the Government of the Republic of Korea n the
Promotion and Protection of Investments (1996 India-Republic of Korea BIT), dated February 26, 1996, at Art. 10(2),
available at: http://www.unctad.org/sections/dite/iia/docs/bits/korea_india.pdf (last visited April 8, 2011).
91
Agreement Between the Government of the Republic of India and the Government of Mauritius for the Promotion
and Protection of Investments (1998 India-Mauritius BIT), dated September 4, 1998, at Art. 11(3), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/india_mauritius.pdf (last visited April 8, 2011).
92
Agreement Between the Government of Kingdom of Morocco and the Republic of India for the Promotion and
Protection of Investments (1999 India-Morocco BIT), dated February 13, 1999, at Art. 11(2).
93
Agreement between the Kingdom of the Netherlands and the Republic of India for the Promotion and Protection of
Investments (1995 Netherlands-India BIT), dated November 6, 1995, IC-BT 943 (1995), at Art. 12, available at:
http://untreaty.un.org/unts/144078_158780/3/4/11601.pdf (last visited April 8, 2011).
94
Agreement Between the Government of the Sultanate of Oman and the Government of the Republic of India for the
Promotion and Protection of Investments (1997 India-Oman BIT), dated April 2, 1997, at Art. 12(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/oman_india.pdf (last visited April 8, 2011).
95
Agreement between the Government of the Republic of Poland and the Government of the Republic of India for the
Promotion and Protection of Investments (1996 Poland-India BIT), dated October 7, 1996, IC-BT 1278 (1996), at Art.
12(2), available at: http://www.investmentclaims.com/subscriber_article?script=yes&id=/ic/BITs/law-iic-
bt1278&recno=13&country=India (last visited April 9, 2011).
96
Acordo Entre A República Portuguesa E A República Da Índia Sobre A Promoção E A Protecção Recíprocas De
Investimentos (2002 India-Portugal BIT), dated March 7, 2002, at Art. 12(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/portugal_india_por.pdf (last visited April 8, 2011).
97
Acuerdo Para La Promoción y Protección Recíproca De Inversiones Entre El Reino de Espaňa y la República de la
India (1997 India-Spain BIT), dated September 30, 1997, at Art. 12(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/spain_india_sp.pdf (last visited April 8, 2011).
98
Agreement Between the Government of the Democratic Socialist Republic of Sri Lanka and the Government of the
Republic of India for the Promotion and Protection of Investments (1997 India-Sri Lanka BIT), dated January 2, 1997,
at Art. 12(2), available at: http://www.unctad.org/sections/dite/iia/docs/bits/srilanka_india.pdf (last visited April 8,
2011).
99
Agreement Between the Government of the Kingdom of Sweden and the Government of the Republic of India for the
Promotion and Protection of Investments (2000 India/Sweden BIT), dated July 4, 2000, at Art. 12(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/sweden_india.pdf (last visited April 8, 2011).
100
Agreement between the Swiss Confederation and the Republic of India concerning the Promotion and Protection of
Investments (1997 Switzerland-India BIT), dated April 4, 1997, IC-BT 332 (1997), at Art. 11(2).
101
Agreement Between the Government of the Kingdom of Thailand and the Government of the Republic of India for
the Promotion and Protection of Investments (2001 India-Thailand BIT), dated July 13, 2001, at Art. 11(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/thailand_india.pdf (last visited April 8, 2011).
102
Agreement Between the Government of the Republic of Turkey and the Government of the Republic of India
Concerning the Promotion and Protection of Investments (1998 India-Turkey BIT), dated September 17, 1998, at Art.
VIII(2), available at: http://www.unctad.org/sections/dite/iia/docs/bits/TurkeyIndia.pdf (last visited April 8, 2011).
103
Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the
Government of the Republic of India for the Promotion and Protection of Investments (1994 United Kingdom-India
BIT), dated March 14, 1994, IC-BT 795 (1994), at Art. 11(2), available at: http://www.official-
documents.gov.uk/document/cm27/2797/2797.pdf (last visited April 8, 2011).
Electronic copy available at: https://ssrn.com/abstract=3055968
 Nothing in this Agreement precludes the host Contracting Party from taking action for the protection of its
essential security interests or in circumstances of extreme emergency in accordance with its laws applied
104
on a non discriminatory basis.

The India-Italy BIT treaty states:

The provisions of this Agreement shall not in any way limit the right of either Contracting Party to apply
prohibitions or restrictions in circumstances of war or other forms of armed conflict, national emergency
or civil disturbances or to prevent diseases of pests and animals or plants in accordance with its laws
105
normally and reasonably applied on a non discriminatory basis.

The Kazakh treaty states:

Notwithstanding paragraph (1) of this Article nothing in this Agreement precludes the host Contracting
Party from taking action for the protection of its essential security interests or in circumstances of extreme
106
emergency in accordance with its laws normally and reasonably applied on a non discriminatory basis.

Notably, none of these treaties contain the words “it considers” which can be regarded as the

textual hallmark of a “self-judging” clause. The provisions therefore appear expressly to intend a

good faith, or reasonable, application of its law on a non-discriminatory basis. But even these

clauses do not use consistent language and may have slightly different trigger points, making

categorical statements about them difficult. As discussed more fully below, the permissibility of

host-State action is defined by the same concerns for reasonableness that would also be applicable

to more typically “self-judging” clauses—but with a greater definition in each case of what factors

are deemed to limit discretion. These clauses therefore present an interesting test case for the

usefulness of the “self-judging” paradigm.

The Indian treaty program notably does include a recent treaty with a clause that uses the “it

considers” language. The Singapore treaty states:

1. Nothing in this Chapter shall be construed:

...

(b) to prevent a Party from taking any action which it considers necessary for the protection of its essential
security interests

104
Agreement Between the Government of the Hellenic Republic and the Government of the Republic of India on the
Promotion and Reciprocal Protection of Investments (2007 India-Greece BIT), dated April 26, 2007, IC-BT 1484
(2007), at Art. 12(2), available at: http://www.investmentclaims.com/subscriber_article?script=yes&id=/ic/BITs/law-
iic-bt1484&recno=9&country=India (last visited April 8, 2011).
105
Agreement between the Government of the Italian Republic and the Government of the Republic of India on the
Promotion and Protection of Investments (1995 India-Italy BIT), dated November 23, 1995, IC-BT 1198 (1995), at Art.
12, available at: http://www.investmentclaims.com/subscriber_article?script=yes&id=/ic/BITs/law-iic-
bt1198&recno=11&country=India (last visited: April 8, 2011).
106
Agreement Between the Government of the Republic of Kazakstan and Government of the Republic of India for the
Promotion and Reciprocal Protection Of Investments (1996 India-Kazakhstan BIT), dated December 9, 1996, at Art. 12
(2), available at: http://www.unctad.org/sections/dite/iia/docs/bits/kazakh_india.pdf (last visited April 8, 2011).
Electronic copy available at: https://ssrn.com/abstract=3055968
 (i) relating to fissionable and fusionable materials or the materials from which they are derived;

(ii) in time of war or other emergency in international relations;

(iii) relating to the production or supply of arms and ammunition; or

(iv) to protect critical public infrastructures, including communication, power and water infrastructures,
from deliberate attempts intended to disable or degrade such infrastructures; or

(c) to prevent a Party from taking any action in pursuance of its obligations under the United Nations
Charter for the maintenance of international peace and security.

2. Nothing in this chapter shall be construed to require a Party to accord the benefits of this chapter to an
investor that is an enterprise of the other Party where a Party adopts or maintains measures in any
legislation or regulations which it considers necessary for the protection of its essential security interests
with respect to a non-Party or an investor of a non-Party that would be violated or circumvented if the
107
benefits of this chapter were accorded to such an enterprise or to its investments.

It further provides that:

in respect of disputes submitted to arbitration pursuant to paragraph 3(b) and/or paragraph 3(c) of Article
6.21 of the Agreement, where the disputing Party asserts as a defense that the measure alleged to be a
breach is within the scope of a security exception as set out in Article 6.12 of the Agreement, any decision
of the disputing Party taken on such security considerations shall be non-justiciable in that it shall not be
open to any arbitral tribunal to review the merits of any such decision, even where the arbitral proceedings
concern an assessment of any claim for damages and/or compensation, or an adjudication of any other
108
issues referred to the tribunal.

This provision appears on its face narrower, despite its “self-judging” language, than some of its

sister provisions because of the context in which essential security appears. Nevertheless, the annex

to the treaty may impose a justiciability bar in the way of a merits examination of a decision to

invoke it. Its relationship to the other provisions in the Indian program, and whether it can be

invoked more broadly or not than those provisions simply because of its more directly “self-

judging” language, remains to be determined.

d. Belgium109

Belgium and Luxembourg have a longstanding European treaty program relying on non-precluded

measures clauses. These clauses take yet a different approach to non-precluded measures clauses.

The first such clause, still in force today, was in the Belgium-China BIT concluded in 1984. It is

limited to treatment protections, rather than also expressly including the treaty’s expropriation and

transfer protections, and states:

107
India-Singapore Comprehensive Economic Cooperation Agreement (CECA) (2005 India-Singapore CECA), dated
June 29, 2005, at Art. 6.12, available at: http://commerce.nic.in/ceca/ch6.pdf (last visited April 8, 2011).
108
Id.,, at Annex 5.
109
The bilateral investment treaty program for Belgium is run jointly with Luxembourg through the Belgium-
Luxembourg Economic Union.
Electronic copy available at: https://ssrn.com/abstract=3055968
 Protection and equitable treatment shall be accorded as regards management, operation, use or liquidation
of the above said investment unless necessary measures should be taken for the maintenance of public
110
order and in defense of the State law.

Later treaties included a similar limitation in the article providing treatment protections, stating:

Except for measures required to maintain public order, such investments shall enjoy continuous protection
and security, i.e., excluding any unjustified or discriminatory measure which could hinder, either in law or
111
in practice, the management, maintenance, use, possession or liquidation thereof.

The Belgian BITs with Albania,112 Armenia,113 Azerbaijan,114 Belarus,115 Bosnia-Herzegovina,116

Estonia,117 Ethiopia,118 Georgia,119 Guatemala,120 Kazakhstan,121 Latvia,122 Lebanon,123 Libya,124

110
Agreement between the Government of the People’s Republic of China and the Belgian–Luxembourg Economic
Union on the Reciprocal Promotion and Protection of Investments (1984 China-Belgium–Luxembourg Economic
Union BIT 1984), dated June 4, 1984, IC-BT 418 (1984), at Art. 3(2), available at:
http://be2.mofcom.gov.cn/aarticle/bilateralcooperation/bilateralagreement/200709/20070905118334.html (last visited
April 8, 2011).
111
Agreement between the Republic of Cyprus and the Belgo–Luxembourg Economic Union on the Reciprocal
Promotion and Protection of Investments (and exchange of letters) (1991 Cyprus-Belgium–Luxembourg Economic
Union BIT), dated February 26, 1991, IC-BT 1121 (1991), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_cyprus.pdf
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_cyprus.pdf (last visited April 8, 2011).
112
Agreement between the Belgo–Luxembourg Economic Union and the Government of the Republic of Albania on the
Reciprocal Promotion and Protection of Investments (1999 Belgium-Luxembourg Economic Union-Albania BIT),
dated February 1, 1999, IC-BT 1097, at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_albania_fr.pdf (last visited April 8, 2011) (including it
exceptionally after the MFN and national treatment provisions).
113
Agreement between the Belgo—Luxembourg Economic Union and the Republic of Armenia on the Reciprocal
Promotion and Protection of Investments (2001 Belgium–Luxembourg Economic Union-Armenia BIT), dated June 7,
2001, IC-BT 1099 (2001), at Art. 3(2), available at: http://untreaty.un.org/unts/144078_158780/5/4/12949.pdf (last
visited April 8, 2011).
114
Agreement between the Belgo–Luxembourg Union and the Government of the Republic of Azerbaijan on the
Reciprocal Promotion and Protection of Investments (2004 Belgium–Luxembourg Economic Union-Azerbaijan BIT),
dated May 18, 2004, IC-BT 1100 (2004), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belgium_azerbaijan.pdf (last visited April 8, 2011).
115
Agreement between the Belgo–Luxembourg Union, on the one hand, and the Government of the Republic of
Belarus, on the other hand, on the Reciprocal Promotion and Protection of Investments (2002 Belgium–Luxembourg
Economic Union-Belarus BIT), dated April 9, 2002, IC-BT 1103 (2002), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Belarus-eng.pdf (last visited April 8, 2011).
116
Agreement between the Belgo–Luxembourg Economic Union, on the one hand, and Bosnia–Herzegovina, on the
other hand, on the Reciprocal Promotion and Protection of Investments (2004 Belgium–Luxembourg Economic Union-
Bosnia and Herzegovina BIT), dated March 3, 2004, IC-BT 1106 (2004), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Bosnie-eng.pdf (last visited April 8, 2011).
117
Agreement between the Belgo–Luxembourg Economic Union and the Republic of Estonia on the Reciprocal
Promotion and Protection of Investments (1996 Belgium–Luxembourg Economic Union-Estonia BIT), dated January
24, 1996, IC-BT 1124 (1996), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_estonia_fr.pdf (last visited April 8, 2011).
118
Agreement between the Belgian–Luxembourg Economic Union, on the one hand, and the Federal Democratic
Republic of Ethiopia, on the other hand, on the Reciprocal Promotion and Protection of Investments (2006 Belgium-
Luxembourg Economic Union-Ethiopia BIT), dated October 20, 2006, IC-BT 1125 (2006), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Ethiopie-eng.pdf (last visited April 8, 2011).
119
Agreement between the Belgo–Luxembourg Economic Union and the Republic of Georgia on the Reciprocal
Promotion and Protection of Investments (1993 Belgium–Luxembourg Economic Union-Georgia BIT), dated June 23,
1993, IC-BT 1127 (1993), at Art. 3(2) available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_georgia_fr.pdf (last visited April 8, 2011).
120
Agreement between the Belgo–Luxembourg Economic Union and the Government of the Republic of Guatemala on
the reciprocal promotion and protection of investments (2005 Belgium–Luxembourg Economic Union-Guatemala BIT),
dated April 14, 2005, IC-BT 1128 (2005), at Art. 3, available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Guatemala-eng.pdf (last visited April 8, 2011).
Electronic copy available at: https://ssrn.com/abstract=3055968
Lithuania,125 Macedonia,126 Mauritius,127 Mexico,128 Peru,129 Philippines,130 Serbia,131 Sudan,132

Uganda,133 Ukraine,134 Uzbekistan,135 and Zambia136 contain similar provisions.

121
Agreement between the Government of the Republic of Kazakhstan, on the one hand, and the Belgo–Luxemburg
Economic Union, on the other hand on the Reciprocal Promotion and Protection of Investments (1998 Kazakhstan-
Belgium–Luxembourg Economic Union BIT), dated April 16, 1998, IC-BT 1133 (1998), at Art. 3, available at:
http://www.unctad.org/sections/dite/iia/docs/bits/kazak_belgo_lux.pdf (last visited April 8, 2011).
122
Agreement between the Belgo-Luxembourg Economic Union and the Republic of Latvia on the Reciprocal
Promotion and Protection of Investments (1996 Belgium–Luxembourg Economic Union-Latvia BIT), dated March 27,
1996, IC-BT 1136 (1996), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_latvia_fr.pdf (last visited April 8, 2011).
123
Agreement between the Government of the Lebanese Republic and the Belgo-Luxembourg Economic Union on the
Reciprocal Promotion and Protection of Investments (1999 Lebanon-Belgium–Luxembourg Economic Union BIT),
dated September 6, 1999, IC-BT 137 (1999), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/lebanon_belg_lux.pdf (last visited April 8, 2011).
124
Agreement between the Belgo-Luxemburg Economic Union, on the one hand, and the Great Socialist People’s
Libyan Arab Jamahiriya, on the other hand, on the Reciprocal Promotion and Protection of Investments (2004
Belgium–Luxembourg Economic Union-Libyan Arab Jamahiriya BIT), dated February 15, 2004, IC-BT 1139 (2004), at
Art. 3(2), available at: http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Liby-eng.pdf (last visited April 8, 2011).
125
Agreement between the Belgo-Luxembourg Economic Union and the Republic of Lithuania on the Reciprocal
Promotion and Protection of Investments (1997 Belgium–Luxembourg Economic Union-Lithuania BIT), dated October
15, 1997, IC-BT 1140 (1997), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_lithuania_fr.pdf (last visited April 8, 2011).
126
Agreement between the Belgo–Luxembourg Economic Union and the Macedonian Government on the Reciprocal
Promotion and Protection of Investments (1999 Belgium–Luxembourg Economic Union-Macedonia BIT), dated
February 17, 1999, IC-BT 1141 (1999), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_macedonia_fr.pdf (last visited April 8, 2011).
127
Agreement between the Belgian-Luxembourg Economic Union and the Republic of Mauritius on the reciprocal
encouragement and protection of investments (2005 Belgium–Luxembourg Economic Union-Mauritius BIT), dated
November 30, 2005, IC-BT 1148 (2005), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Mauritius-eng.pdf (last visited April 8, 2011).
128
Agreement between the United Mexican States and the Belgo–Luxemburg Economic Union on the Reciprocal
Promotion and Protection of Investments (1998 Belgium–Luxembourg Economic Union-Mexico BIT), dated August
27, 1998, at Art. 3(2), available at: http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_mexico_fr.pdf (last
visited April 8, 2011).
129
Agreement between the Belgian-Luxembourg Economic Union, on the one hand, and the Government of the
Republic of Peru, on the other hand, on the Reciprocal Promotion and Protection of Investments (2005 Belgium–
Luxembourg Economic Union-Peru BIT), dated October 12, 2005, IC-BT 1068 (2005), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belgium_peru_fr.pdf (last visited April 8, 2011).
130
Agreement between the Belgo-Luxembourg Economic Union and the Republic of the Philippines on the Reciprocal
Promotion and Protection of Investments (1998 Belgium–Luxembourg Economic Union-Philippines BIT), dated
January 14, 1998, IC-BT 1069 (1998), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_philippines.pdf (last visited April 8, 2011).
131
Agreement between the Belgo-Luxemburg Economic Union, on the one hand, and the Serbia and Montenegro, on
the other hand, on the Reciprocal Promotion and Protection of Investments (2004 Belgium–Luxembourg Economic
Union-Serbia and Montenegro BIT), dated March 6, 2004, IC-BT 1075 (2004), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Servie-eng.pdf (last visited April 8, 2011).
132
Agreement between the Belgian-Luxembourg Economic Union, on the one hand, and the Republic of Sudan, on the
other hand, on the reciprocal promotion and protection of investments (2005 Belgium–Luxembourg Economic Union-
Sudan BIT), dated November 7, 2005, IC-BT 1081 (2005), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Soedan-eng.pdf (last visited April 8, 2011).
133
Agreement between the Republic of Uganda, on the one hand, and the Belgo-Luxemburg Economic Union, on the
other hand, on the reciprocal promotion and protection of investments (2005 Uganda-Belgium–Luxembourg Economic
Union BIT), dated February 1, 2005, IC-BT 1085 (2005), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/uganda_belgium.pdf (last visited April 8, 2011).
134
Agreement between the Belgo-Luxembourg Economic Union, on the one hand and the Government of Ukraine, on
the other hand on the Reciprocal Promotion and Protection of Investments (1996 Belgium–Luxembourg Economic
Union-Ukraine BIT), dated May 20, 1996, IC-BT 1086 (1996), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_ukraine_fr.pdf (last visited April 8, 2011).
135
Agreement between the Belgo-Luxembourg Economic Union, on the one hand, and the Government of the Republic
of Uzbekistan, on the other hand, on the Reciprocal Promotion and Protection of Investments (1998 Belgium–
Luxembourg Economic Union-Uzbekistan BIT), dated April 17, 1998, IC-BT 1089 (1998), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/belg_lux_uzbekistan_fr.pdf (last visited April 8, 2011).
Electronic copy available at: https://ssrn.com/abstract=3055968
e. Conclusion

This limited survey confirms that non-precluded measures clauses differ from treaty program to

treaty program. Such clauses also differ in significant ways within the same treaty programs.137 It is

accordingly difficult to speak to non-precluded measures clauses with much generality. It is

particularly difficult, given the variations in the clauses, to address what it means for one to be

“self-judging.”

Rather, each clause will have to be interpreted as it stands and applied to the facts at bar. Such an

application may lead to different outcomes in different cases. In some cases, an invocation by a

State of a non-precluded measures provision could be successful under precisely the same factual

circumstances that would cause the invocation of such a clause under a different treaty to fail.

Although this statement would be accepted as a truism by almost every participant in international

investment law, it has an important corollary: The use of past decisions by other investment

tribunals dealing with similar clauses, but not the same clause, must play a more limited role even

as a matter of textual interpretation than with regard to treaty provisions that are more uniformly

worded.

I. Are non-precluded measures clauses jurisdictional?

A non-precluded measures provision would be literally “self-judging” if its mere invocation would

deprive a tribunal of jurisdiction over a dispute. Only in that instance would the host-State be the

“sole” arbiter of the merits of a dispute.138 A resolution of a dispute subject to a jurisdictional non-

precluded measures clause by an arbitral tribunal would be in excess of its powers.139 Depending

upon the dispute and whether the non-precluded measures clause would have been properly invoked

by the respondent State, this excess of power could be manifest. Consequently, failure to abide

proper invocation of a non-precluded measures clause would be both impermissible under the

136
Agreement between the Belgo-Luxembourg Economic Union and the Government of the Republic of Zambia on the
Reciprocal Promotion and Protection of Investments (2001 Belgium–Luxembourg Economic Union-Zambia BIT),
dated May 13, 2001, IC-BT 1093 (2001), at Art. 3(2), available at:
http://www.unctad.org/sections/dite/iia/docs/bits/BLEU-Zambia-eng.pdf (last visited April 8, 2011).
137
As discussed below, the signal words for a self-judging clause is the inclusion of “it considers” in the clause.
138
CMS Gas Transmission Company v. Argentina, op. cit., award (May 12, 2005), at ¶ 366.
139
See e.g., Compañia De Aguas Del Aconquija S.A. and Vivendi Universal v. Argentina, ICSID Case No. ARB/97/3,
decision on annulment (July 3, 2002), available at:
http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&docId=DC552_En&caseI
d=C159 (last visited April 8, 2011).
Electronic copy available at: https://ssrn.com/abstract=3055968
investment agreement and potentially annullable under the ICSID Convention.140 This would be an

effective way for a clause to be “self-judging.”

This section discusses jurisdictional arguments raised with regard to non-precluded measures

clauses in the trade law GATT context and how they could be relevant to BITs. It further addresses

two non-precluded measures clauses surveyed in the previous section that go beyond the GATT

provisions used as a comparison by some commentators. It finally addresses how drafters could

approach jurisdictional limitations in future treaties.

International investment agreements do not automatically create rights of action for international

investors.141 A person or company has a right of action under an international investment

agreement, only to the extent that the agreement contains a jurisdictional undertaking granting a

person or company such a right.142 Treaties govern if disputes can be submitted to dispute resolution

directly by an investor. If a non-precluded measures clause would remove disputes as to which a

State has invoked an essential security interest from the scope of consent, such a provision typically

would be considered to affect jurisdiction ratione voluntatis.143

Some countries have taken the position that Article XXI GATT acts as a jurisdictional bar with

respect to non-precluded measures clauses. Article XXI states as follows:

Nothing in this Agreement shall be construed

(a) to require any contracting party to furnish any information the disclosure of which it considers contrary
to its essential security interests; or

(b) to prevent any contracting party from taking any action which it considers necessary for the protection
of its essential security interests

(i) relating to fissionable materials or the materials from which they are derived;

(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods
and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;

140
Vladimír Balaš, “Review of awards,” in Peter Muchlinski et al, eds., Oxford handbook on international investment
law (New York: Oxford University Press, 2008), at pp. 1127–1151.
141
See, e.g., Rudolf Dolzer and Christoph Schreuer, Principles of investment law (New York: Oxford University Press,
2008), p. 223.
142
See, e.g., Rudolf Dolzer and Christoph Schreuer, Principles of investment law, op. cit., pp. 214–223.
143
Treaties frequently limit the consent to dispute resolution to certain subject matters. For example, many Chinese
BITs limit arbitration to the quantum of compensation for a lawfully declared expropriation. See, e.g., Norah Gallagher,
Wenhua Shan, Chinese investment treaties, op. cit. at pp. 313–314 (“The most common wording used in the Chinese
BITs that include the restrictive clause is where it specifically refers to disputes ‘involving the amount of compensation
for expropriation.” The 1991 Mongolia BIT is a good example of such a clause. Article 8 states: “(3) If a dispute
involving the amount of compensation for expropriation cannot be settled within six months after resort to negotiations
as specified in paragraph 1 of this Article, it may be submitted at the request of either party to an ad hoc arbitral
tribunal.’”)
Electronic copy available at: https://ssrn.com/abstract=3055968
 (iii) taken in time of war or other emergency in international relations; or

(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United
144
Nations Charter for the maintenance of international peace and security.

This article, read in isolation, resembles similar provisions in investment agreements. It has

therefore been used as a potential comparison for the application of non-precluded measures clauses

in the investment context.145

The United States in particular has taken the position that Article XXI is a jurisdictional bar.146

As commentators have noted, there has been no final precedent on the issue whether Article XXI in

fact does act as a jurisdictional bar because this issue was never submitted to dispute resolution.147

On the basis of a contextual analysis of the GATT agreements,148 however, commentary generally

has concluded that the provision would not, in a WTO dispute, preclude jurisdiction.149

This conclusion cannot be adopted wholesale to every investment agreement. An interpretation

of whether the provision acts as a jurisdictional bar can be highly context driven. Each treaty

therefore will have to be considered in its own right when establishing whether a similar argument

could be made that the non-precluded measures clause could act as a jurisdictional bar. To borrow

144
GATT 1947, Art. XXI.
145
See, e.g., Schill, “International investment law and the host state’s power to handle economic crises,” op. cit., at p.
110 (“In fact, various multilateral and bilateral investment treaties contain self-judging clauses that are similar to article
XXI GATT,”).
146
See United States, “Trade measures affecting Nicaragua,” Report by the Panel, Doc. No. L/6053, dated October 13,
1986, at p. 6, available at: http://www.worldtradelaw.net/reports/gattpanels/nicembargo.pdf (last visited April 8,
2011)(“The United States suggested that [. . .] no recommendation could be proposed to remove the embargo since to
do so would imply a judgment on the validity of the national security justification which Article XXI, by its terms, left
to the exclusive jurisdiction of the contracting party taking that action”); see also Dapo Akande and Sope Williams,
“International adjudication on national security issues: What role for the WTO,” 43 Virginia Journal International Law
365 (2002), p. 374 (“[u]nder the GATT 1947, it was argued by a number of contracting parties that where Art. XXI is
invoked, a panel could not be established”); Cann, “Creating standards and accountability for the use of the WTO
security exception: Reducing the role of power-based relations and establishing a new balance between sovereignty and
multilaterialism,” op. cit., pp. 426–435; Schill, “International investment law and the host state’s power to handle
economic crises,” op. cit., at 98–106.
147
See, e.g., Akande, “International adjudication on national security issues: What role for the WTO,” op. cit. (“[i]t
should be remembered that this was at a time when there was no automatic right to have a panel consider disputes
between contracting parties”); Schill, “International investment law and the host state’s power to handle economic
crises,” op. cit., at 98–106; “Analytical index of GATT,” Art. XXI, available at:
http://www.wto.org/english/res_e/booksp_e/gatt_ai_e/gatt_ai_e.htm (last visited April 8, 2011), at p. 600–601.
148
See also “Analytical index of GATT,” Art. XXI, op. cit., at p. 600, (recounting the drafting history “[w]e gave a
good deal of thought to the question of the security exception which we thought should be included in the Chapter. We
recognized that there was great danger of having too wide an exception and we could not put it into the Charter, simply
by saying ‘by any Member of measures relating to a Member’s security interests’ because that would permit anything
under the sun”).
149
See Raj Bhala, “National security and international trade law: What the GATT says, and what the United States
does,” 19 University of Pennsylvania Journal of International Economic Law 263 (1998) at p. 279 (“[i]t is safe to
conclude that a non-sanctioning member has the right to bring an Article XXIII action and invoke the Uruguay Round
Understanding on Rules and Procedures Governing the Settlement of Disputes against a sanctioning member”); see also
Cann, “Creating standards and accountability for the use of the WTO security exception: Reducing the role of power-
based relations and establishing a new balance between sovereignty and multilateralism,” op. cit., at pp. 426–435;
Schill, “International investment law and the host state’s power to handle economic crises,” op. cit., at 98–106.
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from the WTO analysis, however, it would appear that the broader the dispute resolution clause, the

more sweeping the substantive protections provided in the treaty, and the more clearly the object

and purpose of the treaty is the protection of investment flows, the more likely it is that a non-

precluded measures clause worded along similar lines would not, on its own, be considered as a

jurisdictional bar.

Of the non-precluded measures clauses surveyed above, two specific examples go further than

the WTO language in potentially limiting arbitral jurisdiction. They are the India-Singapore CECA,

and the recent U.S. FTAs following the model of the U.S.-Peru FTA.

First, Annex 5 to the India-Singapore CECA expressly states that “where the disputing Party

asserts as a defense that the measure alleged to be a breach is within the scope of a security

exception as set out in Article 6.12 of the Agreement, any decision of the disputing Party taken on

such security considerations shall be non-justiciable in that it shall not be open to any arbitral

tribunal to review the merits of any such decision, even where the arbitral proceedings concern an

assessment of any claim for damages and/or compensation, or an adjudication of any other issues

referred to the tribunal.”150 This provision is jurisdictional in nature and on its face removes a

question from the review of the merits by an arbitral tribunal. Notably, however, even this provision

is not a direct exclusion ratione voluntatis of certain matters from the scope of the consent to

arbitration.151

Second, Article 22.2, read together with footnote 2, of the U.S.-Peru TPA could be argued to

resemble a jurisdictional limitation. It states:

Nothing in this Agreement shall be construed:

(a) to require a Party to furnish or allow access to any information the disclosure of which it determines to
be contrary to its essential security interests; or

(b) to preclude a Party from applying measures that it considers necessary for the fulfillment of its
obligations with respect to the maintenance or restoration of international peace or security, or the
protection of its own essential security interests.[fn.2]

150
2005 India-Singapore CECA, op. cit.
151
Depending on the dispute, a tribunal further may find that its invocation is an abuse of process by the host State and
hold that the State is estopped from raising it.
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 [fn.2] For greater certainty, if a Party invokes Article 22.2 in an arbitral proceeding initiated under Chapter
Ten (Investment) or Chapter Twenty-One (Dispute Settlement), the tribunal or panel hearing the matter
152
shall find that the exception applies.

Similar provisions also appear in the United States-Colombia FTA,153 the draft United States-

Republic of Korea (KORUS) FTA,154 and the United States-Panama TPA.155

Whether Article 22.2 operates as a limitation on jurisdiction, ratione voluntatis depends on the

construction of footnote 2. To the extent that footnote 2 deprives a tribunal of jurisdiction over a

dispute, Article 22.2 operates as a limitation ratione voluntatis. Some commentators have

interpreted it as such.156 But, on its face, the text of footnote 2 does not deprive a tribunal or panel

of jurisdiction over a dispute with regard to which an essential security interest is invoked. To the

contrary, it requires a tribunal to reach a specific conclusion: “[T]he tribunal or panel hearing the

matter shall find that the exception applies.”157 The tribunal consequently would have jurisdiction

over disputes in which Article 22.2 is invoked. The provision therefore would require additional

interpretation to allow the conclusion that it was intended to operate as a jurisdictional bar.158

The lack of a model non-precluded measures limitation ratione voluntatis in a treaty does not

mean that such a provision could not be drafted. Some States have included similar reservations to

their consent to the compulsory jurisdiction of the International Court of Justice. For example,

Djibouti’s acceptance of the Court’s jurisdiction is

with the reservation, however, that this declaration shall not apply to:

152
2006 U.S.-Peru TPA, op. cit., at Art. 22.2.
153
2006 U.S.-Colombia FTA 2006, op. cit., at Art. 22.2, fn. 2.
154
Draft U.S.-Republic of Korea (KORUS) Free Trade Agreement, op. cit., at Art. 22.2, fn. 2.
155
2007 U.S.-Panama TPA, op. cit., at Art. 21.2, fn. 2.
156
Schill, “International investment law and the host state’s power to handle economic crises,” op. cit., at 90 (“[t]his
approach appears to provide virtually complete discretion to a State Party invoking the security exception and also
deprives an arbitral tribunal of the jurisdiction it would otherwise enjoy for disputes arising under the treaty”).
157
2006 U.S.-Peru TPA, op. cit., at Art. 22.2, fn. 2.
158
For example, it could be argued that the clause intended to treat questions covered by the exception as non-
justiciable. As one commentator notes:
Some states have argued that a general principle exists in international law according to which disputes
involving political questions impinging on a country’s vital interests–such as the permissible objectives
covered by BIT NPM clauses–are non-justiciable and exempt from review by international courts and
tribunals. In the original GATT context, for example, the claim has been made that when a state invokes
the national security exception, “a panel could not or should not be established.” The rationale behind the
non-justiciability position is the alleged absence of “judicially manageable standards” of a legal nature for
the evaluation of national security interests.

William W. Burke-White and Andreas von Staden, “Investment protection in extraordinary times: The interpretation
and application of non-precluded measures provisions in bilateral investment treaties,” 48 Virginia Journal of
International Law 307 (2008), p. 376.
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 [. . .]

3. Disputes relating to or connected with facts or situations of hostilities, armed conflicts, individual or
collective actions taken in self-defense, resistance to aggression, fulfilment [sic] of obligations imposed by
international bodies and other similar or related acts, measures or situations in which the Republic of
159
Djibouti is, has been or may in future be involved.

Such an exception or reservation could be included in the consent instrument itself or agreed in a

protocol or exchange of letters. Such an exclusion formally would operate as a limitation of consent

ratione voluntatis.160

Such limitations or reservations would have to be read as they stand rather than by reference to

presumptions.161 Thus, exclusions ratione voluntatis could be framed broadly to apply to “disputes

relating to or connected with facts” defined by the non-precluded measures clause.162 Such an

exclusion could be broad and could be triggered by an event giving rise to a measure, rather than

the measure itself (which almost by definition would be connected with these facts in some form or

another). Such exclusions could run the risk of swallowing the whole consent provision in the

treaty.

Alternatively, exclusions ratione voluntatis could be framed more narrowly to apply only to

allegations that specific government actions breached the treaty. Apart from military examples, such

actions for example could include imposition of an embargo for health reasons.

A properly drafted jurisdictional exception could prevent a tribunal from reaching the merits of a

dispute “related to or connected with facts or situations” defined in the non-precluded measures

clause. The result would be a dismissal not because the tribunal or panel “finds” that the exception

applies, but because it holds that it lacks jurisdiction over the dispute. This distinction is important

because the exercise of jurisdiction by a tribunal or panel over a dispute beyond the scope of the

arbitral consent is a manifest excess of power—and ground for annulment or set aside. The failure

159
“Declaration of Djibouti” pursuant to Article 36(2) of the Statute of the International Court of Justice, (September 2,
2005), available at: http://www.icj-cij.org/jurisdiction/index.php?p1=5&p2=1&p3=3&code=DJ (last visited April 8,
2011).
160
Depending on the dispute, a tribunal further may find that its invocation is an abuse of process by the host state and
hold that the state is estopped from raising it.
161
See, e.g., Fisheries Jurisdiction Case (Spain v. Canada), Jurisdiction of the Court, Judgment of December 4, 1998,
1998 ICJ 432, pp. 449–450.
162
Declaration of Djibouti, op. cit.
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to make factual findings or the misapplication or misinterpretation of law on a merits question

typically is not.163

Alternatively it is possible that non-precluded measures clauses would create exclusions ratione

personae164 or ratione materiae,165 or could be invoked as potential grounds that a dispute is not

admissible.166 For example, Judge Schwebel’s dissenting opinions regarding the International Court

of Justice’s jurisdictional and merits decisions in Military and Paramilitary Activities in and against

Nicaragua focuses on the scope ratione materiae of the Treaty of Friendship, Commerce, and

Navigation of 1956 between Nicaragua and the United States. He reasoned that “[i]t is clear that,

where a treaty excludes from its regulated reach certain areas, those areas do not fall within the

jurisdictional scope of the treaty.”167 The non-precluded measures clause at issue stated that “[t]he

163
Vladimír Balaš, “Review of awards,” in Peter Muchlinski et al eds., Oxford handbook on international investment
law (Oxford University Press, 2008), at pp. 1127–1151. An objection ratione voluntatis in the context of either type of
provision would have to be established according to the terms of the consent to arbitration.
164
The China-Philippines BIT provides an example of such a clause. It contains the following limitation:
Provided that any particular company may be excluded from the foregoing definition [of “investor”] by
mutual agreement between the Contracting Parties on the grounds of the need to maintain public order, to
protect essential security interest or to fulfill commitments relating to international peace and security.

1992 China-Philippines BIT, op. cit., Art. 1(b).

165
One recent example of a ratione materiae exclusion that has an overlap with non-precluded measures is the draft
exclusion of gambling from the scope of the draft U.S.-Republic of Korea Free Trade Agreement. It states in relevant
part:
Notwithstanding Article 11.1 (Scope and Coverage) or Article 12.1 (Scope and Coverage), the cross-
border trade in gambling and betting services is not subject to Chapter Twelve (Cross-Border Trade in
Services) and investment in gambling and betting services is not subject to Chapter Eleven (Investment).

Letter from Hyun Chong Kim to Susan Schwab (June 30, 2007), available at:
http://www.ustr.gov/sites/default/files/uploads/agreements/fta/korus/asset_upload_file993_12732.pdf (last visited April
8, 2011).
Gambling has fallen within the non-precluded measures provisions regarding public morality of the GATT framework.
See United States—Measures Affecting the Cross-Border Supply of Gambling, Appellate Body Report (April 7, 2005)
available at: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm (last visited April 8, 2011). For a
discussion, see Burke-White, “Investment protection in extraordinary times: The interpretation and application of non-
precluded measures provisions in bilateral investment treaties,” op. cit.
166
On the concept of admissibility, see generally Jan Paulsson, “Jurisdiction and admissibility,” in Gerald Aksen et al.
eds., Global reflections on international law, commerce and dispute resolution: Liber amicorum in honour of Robert
Briner, (ICC Publishing: 2005), pp. 601, 605; available at: http://www.arbitration-
icca.org/media/0/12254599444060/jasp_article_-_jurisdiction_and_admissibility_-_liber_amicorum_robert_briner.pdf
(last visited April 8, 2011); see also Ian Laird, “A distinction without a difference? An examination of the concepts of
admissibility and jurisdiction in Salini v. Jordan and Methanex v. U.S.,” in Todd Weiler, International investment law
and arbitration: Leading cases from the ICSID, NAFTA, bilateral treaties, and customary international law (London:
Cameron May, 2005), p. 201. Host states could raise an objection that the ongoing response to an emergency makes
claims regarding the international legality of these measures inadmissible. Such an admissibility defense would draw on
the policy justification that tribunals should not act as legislators, second guessing policy judgments. Where the
response to a crisis is still ongoing, this concern is at its strongest, as a finding that a measure adopted by the host-State
violated a bilateral investment treaty or, worse, customary international law has implications on the domestic front and
could be seen to require corrections to existing emergency legislation.
167 Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. U.S.), Jurisdiction, 1984 ICJ 392, 558,

634 (Schwebel, J. dissenting); see also Military and Paramilitary Activities in and against Nicaragua (1986), op. cit.
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present Treaty shall not preclude the application of measures [. . .] (d) necessary to fulfill the

obligations of a Party for the maintenance or restoration of international peace and security, or

necessary to protect its essential security interests.”168 The consent to the jurisdiction of the

International Court of Justice in the treaty stated “[a]ny dispute between the Parties as to the

interpretation or application of the present Treaty, not satisfactorily adjusted by diplomacy, shall be

submitted to the International Court of Justice.”169 Judge Schwebel reasoned that the exclusion was

jurisdictionally significant because the treaty consent was limited to the interpretation and

application of the treaty—from which the non-precluded measures clause expressly excluded the

measures in question.170 He concluded that the wording of the non-precluded measures clause, the

wording of the jurisdictional consent, and the treaty context of both decisions and the treaty’s object

and purpose the Court lacked jurisdiction, unless the reliance upon the non-precluded measures

clause “is, on its face, without basis.”171

The majority in Military and Paramilitary Activities in and against Nicaragua rejected this

construction of the treaty. It reasoned

This article cannot be interpreted as removing the present dispute as to the scope of the Treaty from the
Court’s jurisdiction. Being itself an article of the Treaty, it is covered by the provision in Article XXIV
that any dispute about the “interpretation or application” of the Treaty lies within the Court’s jurisdiction.
Article XXI defines the instances in which the Treaty itself provides for exceptions to the generality of its
other provisions, but it by no means removes the interpretation and application of that article from the
172
jurisdiction of the Court as contemplated in Article XXIV.

It should be noted, in any event, that the invocation in bad faith, or on the basis of a pretext, of

even a jurisdictional non-precluded measures clause could be grounds for review by a tribunal. In

such an instance, a tribunal could deem that the circumstance “estop” or otherwise preclude the

State from relying on the non-precluded measures clause. The good faith analysis outlined below is

therefore also relevant for jurisdictional undertakings.

As outlined above, it is likely that in many instances, arguments can be made that a tribunal does

have jurisdiction over a dispute despite the invocation by the host-State of a non-precluded

measures clause. The fact that tribunals have jurisdiction over measures with regard to which a

168 Military and Paramilitary Activities in and against Nicaragua (1986), op cit., at p. 307.
169 Military and Paramilitary Activities in and against Nicaragua (1984), op. cit., at p. 629.
170 Military and Paramilitary Activities in and against Nicaragua (1986), op. cit., at pp. 307–308.
171 Military and Paramilitary Activities in and against Nicaragua (1986), op cit., at p. 311.
172 Military and Paramilitary Activities in and against Nicaragua (1986), op cit., at p. 116.

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State has invoked a non-precluded measures clause means that these clauses are not perfectly

described as “self-judging.” Tribunals, not the host-State, judge whether the clause was properly

invoked.173 Some clauses give the State wider latitude of action than others.174 But, as a tribunal has

jurisdiction over the invocation of these clauses in the first place, they are not “self-judging” in the

sense those words are ordinarily understood. As addressed in the next section, the term “self-

judging” refers to the latitude a tribunal gives the State to take certain measures. The tribunal’s

jurisdiction therefore is to interpret and to apply the terms of the treaty to the circumstances of the

case.

II. Framework for interpretation of non-precluded measures clauses as a matter of the merits

Non-precluded measures clauses, whether “self-judging” or not, typically are interpreted and

applied as part of the tribunal’s merits analysis in investment treaty disputes.175 Depending upon

how the treaty provision is structured, non-precluded measures clauses give host States significant

discretion to determine policy responses to certain emergency situations.176 The scope of this

discretion is defined first and foremost by the reach of the clause: The permissible objective

towards which non-precluded measures may be taken, the scope of the non-precluded measures

clause and the nexus required between the measure and the permissible objective.177 The broader

the permissible list of objectives and the looser the nexus, the broader the discretion of the host-

State to enact non-precluded measures.

As discussed in this section, “self-judging” clauses are one treaty option that can be employed in

different ways by treaty drafters. As discussed below, a clause is categorized as “self-judging,” if its

invocation by the host-State is limited only by the host-State’s “consideration” that one or more of

173
See supra at pp. 29–31.
174
See “survey” supra at p. 16.
175
Enron Corporation and Ponderosa Assets LP v. Argentina, decision on application for annulment (July 30, 2010);
Sempra Energy International v. Argentina, decision on Argentina’s application for annulment of the award (June 10,
2010); CMS Gas Transmission Company v. Argentina, decision on application for annulment (August 21, 2007); Enron
Corporation and Ponderosa Assets, LP v. Argentina, award (May 22, 2007); Sempra Energy International v. Argentina,
award (September 18, 2007); LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic, decision on
liability (October 3, 2006); Continental Casualty Company v. Argentina, award (September 5, 2008), at ¶¶ 160–236;
CMS Gas Transmission Company v. Argentina, award (May 12, 2005).
176
For a discussion of the difference between discretion and deference granted to host states, see Schill, “International
investment law and the host State’s power to handle economic crises,” op. cit., at pp. 74–81; see also Alberto Alvarez-
Jiménez, “Foreign investment protection and regulatory failures as states’ contribution to the state of necessity under
customary international law,” 27 Journal of International Arbitration 2 (2010), pp. 141–177 (discussing the overlap of
the invocation of customary international law necessity defenses, non-precluded measures clauses and the method of
review of government action under international investment agreement treatment protections).
177
Burke-White, “Investment protection in extraordinary times: The interpretation and application of non-precluded
measures provisions in bilateral investment treaties,” op. cit., at pp. 329–327.
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the requirements of the clause are fulfilled. This option is not one-size fits all, but can be adapted to

apply to specific elements of the non-precluded measures clause or to the clause in its entirety.

Further, this option does not guaranty that the host-State will have broader discretion than under

some other, non-self-judging clause. Rather, the effect of such clauses will have to be examined on

a case-by-case basis.

This case-by-case analysis should not follow any specific cannons or rubrics that would give any

clause a magical effect to a classification of a clause as self-judging.178 Rather, each clause must be

interpreted as it stands, having regard to the words actually used in light of their context and object

and purpose.179 Further, the Vienna Convention mandates that the applicable rules of customary

international law also be taken into account.180 It is this specific analysis, treaty-by-treaty and case-

by-case, rather than general approaches to non-precluded measures clauses that must determine

their respective scopes.

In many cases, even “self-judging” non-precluded measures provisions therefore may not

prevent a finding by an arbitral tribunal that the host-State breached the underlying investment

treaty but for the non-precluded measures clause. The terms of a specific treaty will dictate whether

the non-precluded measures clause should be addressed ahead of the merits of the investor’s claims.

This approach may be justified under the right factual circumstances in which arbitral economy

clearly favors a dismissal on the basis of the invocation of the non-precluded measures clause.181

But historically non-precluded measures clauses are treated as a defense after liability on the merits

178
See, e.g., Aguas del Tunari, S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, decision on objection to
jurisdiction, (October 21, 2005), at ¶ 91 (“the Vienna Convention represents a move away from the canons of
interpretation previously common in treaty interpretation and which erroneously persist in various international
decisions today”).
179
Aguas del Tunari, S.A. v. Republic of Bolivia, op. cit., decision on objection to jurisdiction (October 21, 2005), at ¶
91.
180
Vienna Convention on the Law of Treaties, Art. 31(3)(c). See also Mark E. Villiger, Commentary on the 1969
Vienna Convention on the Law of Treaties (Leiden: Martinus Nijhoff Publishers, 2009), p. 432 (“These need have no
particular relationship with the treaty other than assisting in the interpretation of its terms. On the whole, they will
provide a contemporary interpretation of the ordinary meaning of a term”); Richard Gardiner, Treaty interpretation
(New York: Oxford University Press, 2008) pp. 260–263.
181
Some treaties are worded in a way to create potential significant economies. See e.g., 2006 U.S.-Peru TPA, op. cit.,
Art. 22.2, footnote 2 (“if a Party invokes Article 22.2 in an arbitral proceeding initiated under Chapter Ten (Investment)
[. . .] the tribunal or panel hearing the matter shall find that the exception applies”). Such a preference for economy is by
no means mandated by the clause but depends on the factual circumstances of each case. In some instances, investors
may affirmatively request that such findings be made on account of investment insurance coverage they have received
requiring arbitral findings that the host state has breached international law. Depending on the policy wording, a
tribunal could feel that it can do substantive justice by making such findings despite the potentially greater arbitral
economy in dismissing the claim only by reference to the non—precluded measures provision.
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has otherwise been established, at least in the context of treaties of Friendship, Commerce, and

Navigation (FCN).182

a. Interpretation of the non-precluded measures clause in context

Non-precluded measures clauses must be applied, like other treaty provisions, according to the

Vienna Convention on the Law of Treaties. This means that these provisions must be “interpreted in

good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their

context and in the light of its object and purpose.”183 The Vienna Convention further states that

“[t]here shall be taken into account, together with the context: [. . .] any relevant rules of

international law applicable in the relations between the parties.”184

The ordinary meaning of such clauses understandably has been the main focus of academic

articles surveying the subject matter because general conclusions on the subject most easily can be

derived from textual differences between clauses in different treaties.185 This article also has

provided such an overview and will provide an analysis of textual differences. The textual

conclusions to be drawn from these clauses are limited because each clause has meaning in a

specific treaty context.

182
This was also the approach taken by the International Court of Justice under the Nicaragua-U.S. FCN treaty. It noted
that the provision
Since Article XXI of the 1956 Treaty contains a power for each of the parties to derogate from the other
provisions of the Treaty, the possibility of invoking the clauses of that Article must be considered once it
is apparent that certain forms of conduct by the United States would otherwise be in conflict with the
relevant provisions of the Treaty. The appraisal of the conduct of the United States in the light of these
relevant provisions of the Treaty pertains to the application of the law rather than to its interpretation, and
the Court will therefore undertake this in the context of its general evaluation of the facts established in
relation to the applicable law.

Military and Paramilitary Activities in and against Nicaragua (1986) op. cit. at p. 117.
183
Vienna Convention on the Law of Treaties, Art. 31(1).
184
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
185
See generally Burke-White, “Investment protection in extraordinary times: The interpretation and application of non-
precluded measures provisions in bilateral investment treaties,” op. cit., at pp. 329–327; Jorge E. Vinuales, “State of
necessity and peremptory norms in international investment law,” 14 The Law and Business Review of the Americas 1
(2008); Meg Kinnear, Andrea Bjorklund et al, Investment disputes under NAFTA: An annotated guide to NAFTA
Chapter 11, (The Netherlands, Kluwer, 2006), pp. 1138/1–1138/10; Schill, “International investment law and the host
state’s power to handle economic crises,” op. cit.
See also Sempra Energy International v. Argentina, op. cit., decision on Argentina’s application for annulment of the
award, (June 10, 2010), at ¶ 188; Continental Casualty Company v. Argentina, op. cit., award (September 5, 2008), at ¶
164 (interpreting Article XI of the BIT by reference to its “ordinary meaning”);
Compare Sempra Energy International v. Argentina, op. cit. award, (September 18, 2007), at ¶¶ 374–378; CMS Gas
Transmission Company v. Argentina, op. cit., decision on application for annulment, (August 21, 2007), at ¶¶ 128–136;
CMS Gas Transmission Company v. Argentina, op. cit. award, (May 12, 2005), at ¶ 359 (“the Tribunal must determine
is whether Article XI of the Treaty can be interpreted in such a way as to provide that it includes economic emergency
as an essential security interest”).
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 The context of the non-precluded measures clauses is particularly important. As commentators

have noted, many non-precluded measures clauses are textually open-ended.186 The open-ended

nature of many non-precluded measures provisions requires specific analysis of protections

provided in other relevant provisions.187 These provisions include the compensation for loss clauses

of the respective treaties, as well as the treatment and potentially transfer protections. The extension

of broad protections in both instances may indicate that the treaties intend to provide investors with

more rather than with less substantive protections. This would have to be taken into account when

interpreting non-precluded measures provisions.188

The object and purpose of a treaty similarly is of great importance. Object and purpose was

considered by a majority of the tribunals interpreting Article XI of the U.S.-Argentina BIT in

support of their respective conclusions regarding the provision.189 For example, the International

Court of Justice’s interpretation of the FCN between Nicaragua and U.S., including its non-

precluded measures clause, frequently referenced the object and purpose of that treaty.190 To the

extent that a measure at issue in a non-precluded measure defense is clearly inconsistent with the

object and purpose of a treaty,191 the burden will be greater on the State to show that the language of

the non-precluded measures clause nevertheless permits it. Conversely, where the object and

186
See generally Burke-White, “Investment protection in extraordinary times: The interpretation and application of non-
precluded measures provisions in bilateral investment treaties,” op. cit.; Kinnear, Investment disputes under NAFTA, op.
cit., at pp. 1138/1–1138/10; Vinuales, “State of necessity and peremptory norms in international investment law,” op.
cit.
187
Vienna Convention on the Law of Treaties, Article 31(1).
188
See, e.g., Aguas del Tunari, S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, decision on objection to
jurisdiction (October 21, 2005), at ¶ 91.
189
Continental Casualty Company v. Argentina, op. cit. Award (September 5, 2008), at ¶ 164 (referring to the “ordinary
meaning of the language used, together with its object and purpose”); CMS Gas Transmission Company v. Argentina,
op. cit. award, (May 12, 2005), at ¶ 353 (“[t]he first issue the Tribunal must determine is whether the object and
purpose of the Treaty exclude necessity”); Sempra Energy International v. Argentina, op cit. award, (September 18,
2007), at ¶¶ 373 (“In weighing this discussion, the Tribunal must first note that the object and purpose of the Treaty is,
as a general proposition, for it to be applicable in situations of economic difficulty and hardship that require the
protection of the internationally guaranteed rights of its beneficiaries”); Enron Corporation and Ponderosa Assets, LP
v. Argentina, op. cit. award (May 22, 2007), at ¶ 332 (“While there is nothing that would prevent an interpretation
allowing for the inclusion of economic emergency in the context of Article XI, to interpret that such a determination is
self-judging would be definitely inconsistent with the object and purpose noted”).
190
Military and Paramilitary Activities in and against Nicaragua (1986) op. cit. at p. 136.
191
See, e.g., 1991 U.S.-Argentina BIT, op. cit., Preamble (“Recognizing that agreement upon the treatment to be
accorded such investment will stimulate the flow of private capital and the economic development of the Parties;
Agreeing that fair and equitable treatment of investment is desirable in order to maintain a stable framework for
investment and maximum effective use of economic resources.”) This language was important to several tribunals
interpreting Article XI of the same BIT.
Electronic copy available at: https://ssrn.com/abstract=3055968
purpose of a treaty already references a broader respect for state sovereignty and economic

oversight,192 a broader construction of non-precluded measures may be appropriate.

Finally, the terms in the non-precluded measures clauses must be interpreted in light of “any

relevant rules of international law applicable in the relations between the parties.”193 This includes

the customary international law of necessity. The Vienna Convention states that custom

international law be taken into account “together with context.”194 As one commentator on the

Vienna Convention notes

The rules to be resorted to may be general, regional or local customary rules, as well as bilateral or
multilateral treaties, and even general principles of international law. It is assumed that in entering treaty
obligations, the parties did not intend to act inconsistently with other previous obligations. The applicable
rules are those in force at the time of the interpretation of the treaty. Furthermore, the rules will have to be
relevant, i.e., concern the subject matter of the treaty term at issue. In the case of customary rules, these
may even be identical with, and run parallel to, the treaty rule. Non-identical customary rules on the
subject matter may lead to a modification of the treaty term as a result of subsequent practice running
195
counter to the treaty provision.

Commentary on Article 31(3)(c) of the Vienna Convention explains further

But, even when it is not made express, the principle of systemic integration will apply, and may be
articulated as a presumption with both positive and negative aspects:

(a) negatively that, in entering into treaty obligations, the parties intend not to act inconsistently with
generally recognized principles of international law or with previous treaty obligations towards third
states; and,

(b) positively that the parties are taken “to refer to general principles of international law for all questions
196
which [the treaty] does not itself resolve in express terms or in a different way”: Georges Pinson.

This commentary goes on to observe that

Thus most of the cases considered in this article have involved the assertion and application of principles
of customary international law.

[. . .]

This has been typically done in one of three situations:

(a) The treaty rule is unclear and the ambiguity is resolved by reference to a developed body of
international law (as in the issue of double nationality dealt with by the Iran-U.S. Claims Tribunal in
Esphananian v. Bank Tejarat);

192
See, e.g., 1991 Mongolia-China BIT, Preamble (“Desiring to encourage, protect and create favorable conditions for
investment by investors of one Contacting State in the territory of the other Contracting State based on the principles of
mutual respect for sovereignty, equality and mutual benefit and for the purpose of the development of economic
cooperation and friendly relations between both States”). The treaty does not contain a non-precluded measures clause.
193
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
194
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
195
Villiger, “Commentary on the 1969 Vienna Convention on the Law of Treaties,” op. cit., at p. 433.
196
Campbell McLachlan, “The principle of systemic integration and Article 31(3)(c) of the Vienna Convention,” 54
International and Comparative Law Quarterly 279 (2005) at p. 311.
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 (b) The terms used in the treaty have a well-recognized meaning in customary international law, to which
the parties can therefore be taken to have intended to refer. This is the case, for example, in the
construction of the terms “fair and equitable treatment” and “full protection and security,” discussed in
Pope & Talbot Inc v. Canada; or

(c) The terms of the treaty are by their nature open-textured and reference to other sources of international
197
law will assist in giving content to the rule.

In summary, customary international law does not replace the treaty provisions as recognized by

several ICSID ad hoc committees.198 But the treaty provisions cannot be read completely

independently from these customary international law rules—especially where the terms used in the

treaty clause reflect terms that are typically used in the prevailing formulation of customary

international law.199 This result notably was accepted by the Continental Casualty tribunal even

after holding that the non-precluded measures clause in the U.S.-Argentina BIT “is not necessarily

subject to the same conditions of application as the plea of necessity under general international

law.”200

It is not correct that an interpretation of non-precluded measures clauses in light of, or where

appropriate consistent with, customary international law necessarily deprives non-precluded

197
McLachlan, “The principle of systemic integration and Article 31(3)(c) of the Vienna Convention,” op. cit., at p.
312.
198
CMS Gas Transmission Company v. Argentina, op. cit., award, (May 12, 2005); CMS Gas Transmission Company v.
Argentina, op. cit., decision on application for annulment, (August 21, 2007); Sempra Energy International v.
Argentina, op. cit., award (September 18, 2007); Enron Corporation and Ponderosa Assets, LP v. Argentina, op. cit.,
award (May 22, 2007); LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine Republic,
op. cit., decision on liability (October 3, 2006); Sempra Energy International v. Argentina, op. cit., decision on
Argentina’s application for annulment of the award, (June 10, 2010); Enron Corporation and Ponderosa Assets LP v.
Argentina, op. cit., Decision on application for annulment (July 30, 2010).
199
See, e.g., Kinnear, “Investment Disputes under NAFTA,” op. cit., at p. 1138/6 (noting with regard to Article XI of
the U.S.-Argentina BIT and the customary international law standard of necessity that “while the state of necessity does
not equate directly with national security, there is some overlap”).
200
Continental Casualty Company v. Argentina, op. cit., award (September 5, 2008), at ¶¶ 167–168. The tribunal
explained
There is a link, however, between the two types of regulation. First of all, they both intend to provide
flexibility in the application of international obligations, recognizing that necessity to protect national
interests of a paramount importance may justify setting aside or suspending an obligation, or preventing
liability from its breach. Moreover, the practical result of applying the carve-out of Article XI, rather than
the defense of necessity, may be the same: condoning conduct that would otherwise be unlawful and thus
removing responsibility from the State. This would also be so if Art. XI is viewed as a specific bilateral
regulation of necessity for purposes of the BIT (thus a kind of lex specialis), pre-empting recourse to the
more restrictive customary exception of necessity. These connections may be relevant as to the
interpretation of the bilateral provision in Art. XI, in that the customary concept of necessity may be
relevant in this respect. The Tribunal will therefore focus on the analysis of Art. XI and the conditions of
its application, referring to the customary rule on State of Necessity (as enshrined in Art. 25 of the ILC
test) only insofar as the concepts there used assist in the interpretation of Art. XI itself.

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measures clauses of independent meaning, or effet utile.201 First, the Vienna Convention on the Law

of Treaties expressly requires that account be taken of such customary international law rules.202 By

definition, it cannot be impermissible.203 Second, some treaty clauses other than non-precluded

measures clauses reflect customary international law rather than being additive to it. This is for

example the case with regard to the NAFTA-specific fair and equitable treatment provision.204

Treaty parties therefore do at times include customary international law protections in their treaties.

Third, the non-precluded measures clauses may use customary international law concepts of

necessity, but expressly apply them to different specific permissible objectives—or objectives that

are at the edge of the customary international law definition.205 These objectives may modify the

customary international law of necessity as it exists today—or as it may develop in the future.

In light of the importance of customary international law for the interpretation of treaty

provisions reflected in the Vienna Convention on the Law of Treaties, what is to be made of the

recent annulment decisions in the Argentina cases? This is an issue that will have to be decided in

the resubmitted cases. Fundamentally, however, it would be incorrect to submit that the non-

precluded measures provision should be interpreted without any reference to customary

international law. Such an approach may fail to apply the international law of treaty

interpretation.206 Rather, customary international law should be given importance “together with

context.”207 It is a factor to give meaning to the words used in the treaty, but not the only factor to

be considered.

b. Elements of non-precluded measures clauses

Literature on non-precluded measures clauses usefully distinguishes between three elements: The

nexus between the measure and the permissible goal, the scope of the clause, and the permissible

201
See Burke-White, “Investment protection in extraordinary times: The interpretation and application of non-precluded
measures provisions in bilateral investment treaties,” op. cit.; Burke-White, “Part IV Chapter 17: The argentine
financial crisis: State liability under bits and the legitimacy of the ICSID system” op. cit., at pp. 407, 419–420.
202
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
203
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
204
Glamis Gold Ltd v. United States, IIC 380 (2009), award, Ad hoc—UNCITRAL Arbitration Rules, (May 14, 2009),
at ¶ 19 (“In some bilateral investment treaties, the phrase ‘fair and equitable treatment’ is viewed as autonomous treaty
language. It is not contested at this point in time that the reference in Article 1105 to ‘fair and equitable treatment’ is to
be understood not as autonomous treaty language but in terms of customary international law.”); McLachlan, “The
principle of systemic integration and article 31(3)(c) of the Vienna Convention,” op. cit., at p. 312.
205
See Andrea Bjorklund, “Emergency exceptions: State of necessity and force majeure,” in Peter Muchlinski, et al,
eds., Oxford handbook on international investment law (New York: Oxford University Press, 2008), at pp. 464–523.
206
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
207
Vienna Convention on the Law of Treaties, Art. 31(3)(c).
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objective. Each element is discussed below in light of the examples listed above.208 The next section

discusses whether and how a host-State is entitled to “self-judge” that the element has been met.

Given the diversity of how these elements have been defined in the treaties surveyed, this

permissible “self-judgment” also must differ on a case-by-case basis.

i. “Nexus”

The nexus requirement is the relationship between the measure taken by the host-State and the

objective to which it is used. The examples of non-precluded measures clauses above provide six

different types of nexus. The differences between the different nexus requirements focus on who

may take certain action, where the action must be taken, and whether the action must be necessary:

• application by either Party of measures necessary for.209

• application by either Party or any political subdivision thereof of any and all measures necessary

in its territory for.210

• application by either Party or any subdivision thereof of any and all measures necessary for [. . .]

or such measures deemed appropriate by the Parties to fulfill future international obligations.211

• to accord discriminatory treatment, in accordance with it’s applicable laws and regulations, to

nationals and companies of the other Contracting Party, in case it is really necessary for the

reason of pubic [sic] order, national security or sound development of national economy.212

• any action which it considers necessary.213

• right of either Contracting Party to apply prohibitions or restrictions of any kind or take any

other action directed to.214

The crucial question applicable to most of the treaties containing non-precluded measures

clauses is the meaning of “necessary.” The comparison of treaties shows that alternative, and more

permissible language would have been available. The examples above are (1) “measures deemed

appropriate,”215 (2) “action directed to,”216 “taking actions for the protection of,”217 or “apply

208
See “survey” supra at pp. 2- 26.
209
1991 U.S.-Argentina BIT, op. cit., at Art. XI.
210
1986 U.S.-Cameroon BIT, op. cit., at Art. XI(1).
211
1982 U.S.-Egypt BIT, op. cit., at Art. X(1).
212
1988 China-Japan BIT, op. cit., at Protocol ad 3.
213
OECD, “The Multilateral Agreement on Investment Draft Consolidated Text,” op. cit., at p. 77.
214
1988 China-New Zealand BIT, op. cit., at Art. 11.
215
1982 U.S.-Egypt BIT, op. cit., Art. X(1).
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prohibitions or restrictions in circumstances of.”218 In the trade law context, the “General

Exceptions” in the GATT further juxtapose “necessary” as a nexus requirement for example with

regard to measures directed at the protection of public morals219 with “imposed for the protection of

national treasures of artistic, historic or archeological value,”220 and “relating to the conservation of

exhaustible natural resources,”221 among others. Therefore, the choice of the term “necessary,” as a

matter of a strictly textual comparison, would require more than merely a determination of

appropriateness or relationship of the measure with the goal contemplated by the clause.

As a matter of textual interpretation, the dictionary definition of “necessary” offers a starting

point. It defines necessary as “indispensible” or “requisite.”222 This dictionary definition is

consistent with the interpretation of the term necessary in the U.S.-Nicaragua and U.S.-Iran FCNs,

respectively.223 It is consistent with the customary international law definition of necessity that “the

only way a State can safeguard an essential interest” is “not to perform some other international

obligation.”224 This understanding of “necessary” leaves the host-State with very limited policy

discretion: It is inescapable that a responsive measure would be inconsistent with a treaty

obligation. The term even in this narrow understanding does not impose the kind of strict scrutiny

that no other measure would have been conceivable, just that no measure that would not have

violated the treaty would have been available.

On the other end of the spectrum, “necessary” could be interpreted as requiring that the measure

was a reasonable policy reaction to the threat. Such a reading treats “necessary” and “appropriate”

as being nearly synonymous. The difference between both terms would likely be the urgency with

which the State had to act.225 A variation of a less stringent “necessity” would look to a balancing

216
1988 China-New Zealand BIT, op. cit., Art. 11.
217
2007 Greece-India BIT, op. cit., at Art. 12(2). This nexus is further limited by the requirement must be applied in
legally and in a non-discriminatory basis.
218
1996 India-Kazakhstan BIT, op. cit., at Art. 12 (2). This nexus is further limited by the requirement that the measure
must be “in accordance with its laws normally and reasonably applied on a non discriminatory basis.”
219
GATT 1947, at Art. XX(a).
220
GATT 1947, at Art. XX(f).
221
GATT 1947, at Art. XX(g).
222
The Oxford English Dictionary, 2nd ed., vol. X, (Oxford: Oxford University Press, 1989) p. 276
223
Military and Paramilitary Activities in and against Nicaragua (1986), op cit., at p. 141; Case Concerning Oil
Platforms (Iran v. U.S.), judgment, 2003 I.C.J. 161, at p. 183.
224
United Nations, “ILC Draft Articles on State Responsibility,” (2001) Article 25, available at
http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf (last visited April 8, 2011).
225
For a discussion of this understanding of necessity see Burke-White “Investment protection in extraordinary times:
The interpretation and application of non-precluded measures provisions in bilateral investment treaties,” op. cit., at pp.
307, 346–348; for discussion of the concept of “margin of appreciation” invoked by this discussion of necessity, see
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test of the relative importance of the interests to be furthered, the contribution of the measure to the

realization of the ends pursued and the restrictive impact of the measure as against the other

protections in the treaty.226

Which interpretation of “necessary” should be applied will depend upon the specific treaty

context and object and purpose. It will also depend on the facts in which the measure is invoked.

Although generalizations are dangerous, it is likely that in any given circumstance, the answer will

be somewhere on the spectrum between both extremes—but likely closer to one or the other

construction because of the specific facts of the case.

ii. Scope

The scope of the non-precluded measures refers to whether the clause displaces the entire treaty, or

only certain protections. Generally, the clause operates with regard to the entire treaty.227 In some

instances, only certain treatment protections are covered. For example, the 1988 China-Japan BIT

limits the non-precluded measures clause to discriminatory treatment and MFN.228 Belgian treaties

limit only treatment protections by operation of non-precluded measures.229 An intriguing question

may arise if the investor claims for a breach of customary international law, rather than breach of a

treaty. Such claims might be argued to fall within the jurisdictional consent of the host-State in

some bilateral investment treaties. But, if so, it might remain to be decided whether a non-precluded

measures clause drafted by reference to treaty protections operates to preclude customary law

claims.

iii. Permissible Objective

There are many different permissible objectives in non-precluded measures clauses. In many

instances, measures must be for the maintenance of:

Sarah Vasani, “Bowing to the Queen: Rejecting the margin of appreciation doctrine in international investment
arbitration,” in Ian Laird and Todd Weiler eds., Investment treaty arbitration and international law (New York: Juris,
2010), pp. 137–170; Kassi D. Tallent, “The tractor in the jungle: Why investment arbitration tribunals should reject a
margin of appreciation,” in Ian Laird and Todd Weiler ,eds., Investment treaty arbitration and international law (New
York: Juris, 2010), pp. 111–136.
226
Continental Casualty Company v. Argentina, op. cit., award (September 5, 2008), at ¶ 194 (relying on WTO
jurisprudence). As one commentator points out, however, some WTO jurisprudence confirms that “in the ordinary
meaning of the term, ‘necessary’ meant that no alternative existed.”; Cann, “Creating standards and accountability for
the use of the WTO security exception: Reducing the role of power-based relations and establishing a new balance
between sovereignty and multilaterialism,” op. cit., at p. 455.
227
See, e.g., 1998 U.S.-Mozambique BIT, op. cit. at Art. XIV(1) (“this treaty shall not preclude”).
228
1988 China-Japan BIT, op. cit., at Protocol ad 3.
229
1991 Cyprus-Belgium–Luxembourg Economic Union BIT, op. cit., at Art. 3(2).
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• Essential security interests; 230

• International peace and security; 231

• Public order; 232

• Public morals; 233

• Sound development of the national economy; 234

• Protection of human health; 235

• Prevention of diseases and pests in animals or plants; 236

There are two elements to the permissible objectives that must be cumulatively met. There must

be a threat of the kind listed in the treaties. The measure then must be aimed at that threat. The

threats that are most open-ended are essential security, public order, and public morality.

Essential security interests clearly encompass self-defense concerns.237 Tribunals have held that,

as the term is used in the 1991 U.S.-Argentina BIT, essential security interests can encompass

financial crises.238 Borrowing from the customary international law conception of necessity,

essential interests of States may also include environmental and health concerns.239 These concerns

could be included in “essential security interests” in non-precluded measures clauses. But the use of

essential security interests in each treaty must be considered independently. For example, the draft

OECD Multilateral Agreement on Investment limits essential security interests to defense and peace

and security interests.240 In those instances, essential security interests may not include financial

crises as such due to context.

230
2006 U.S.-Peru TPA, op. cit., at Art. 22.2.
231
OECD, “The Multilateral Agreement on Investment draft consolidated text,” op. cit., at p. 77.
232
2002 Japan-Korea BIT, op. cit., at Art. 16(1)(d).
233
1986 U.S.-Cameroon BIT, op. cit., at Art. X(1).
234
1988 China-Japan BIT, op. cit., at Protocol ad 3.
235
1988 China-New Zealand BIT, op. cit., Art. 11.
236
1996 Czech Republic-India BIT, op. cit., Art. 12.
237
Military and Paramilitary Activities in and against Nicaragua (1986), op cit., at pp. 141–142
238
CMS Gas Transmission Company v. Argentina, op. cit., award, (May 12, 2005); CMS Gas Transmission Company v.
Argentina, op. cit., decision on application for annulment, (August 21, 2007); Sempra Energy International v.
Argentina, op. cit., award, (September 18, 2007); Enron Corporation and Ponderosa Assets, LP v. Argentina, op. cit.,
award, (May 22, 2007); LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v. Argentine
Republic, Decision on Liability, op. cit. (October 3, 2006); Sempra Energy International v. Argentina, op. cit., decision
on Argentina’s application for annulment of the award (June 10, 2010); Enron Corporation and Ponderosa Assets LP v.
Argentina, op. cit., decision on application for annulment (July 30, 2010).
239
See Bjorklund, “Emergency exceptions: State of necessity and force majeure,” op. cit., at pp. 464–523.
240
OECD, “The Multilateral Agreement on Investment Draft Consolidated Text,” op. cit., at p. 77.
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 The meaning of public order can differ between jurisdictions.241 In treaties in more than one

official language, these differences may be reflected already in the ordinary meaning of the terms

used in the treaty.242 In those instances, the concept likely would be interpreted to go only so far as

there is agreement between both languages as to what the term means.243 Where this means of

reconciling text is not available, a contextual interpretation will be required to give meaning to the

term. For example, just as with the definition of “necessary,” the substantive protections in the

treaty themselves may shed light on how broad the treaty understands the right of a treaty party to

use its police powers with the effect of impairing investments.

Finally, the reference to public morality is similarly open ended. The meaning of the term can

likely be given better definition if there are specific jurisdictional exclusions (such as gambling).244

Alternatively, the term may have to be given meaning by reference to any legality or admission

requirements in the respective treaty.

iv. Host-State contribution

Many non-precluded measures clauses are silent whether host-State contribution to the underlying

threat to essential security interests, public order etc. deprives the host-State of an ability to invoke

the non-precluded measure clause.245 This again is a question that must be addressed on a case-by-

case basis. It should not be resolved by presumptions, either on account of textual silence of the

specific clause or on account of customary international law rules. Rather, it should be resolved by

examining the treaty clause in the context of the treaty as a whole and in light of the treaty’s object

and purpose.

241
See, e.g., Roel de Lange, “The european public order, constitutional principles and fundamental rights,” 1 Erasmus
Law Review 3 (2007) (discussing comparative law approaches to public order in the EU).
242
See Vienna Convention on the Law of Treaties, Art. 33.
243
See, e.g., Vienna Convention on the Law of Treaties, Art. 33(4) (“the meaning which best reconciles the texts,
having regard to the object and purpose of the treaty, shall be adopted”).
244
See supra at fn. 164.
245
See supra at pp. 2–26. But see Continental Casualty Company v. Argentina, op. cit., award (September 5, 2008), at ¶
234.
Arguably, under Art. XI a Contracting Party may invoke necessity even if the need to protect its essential
security interest has materialized as a consequence of a deliberate but still legitimate policy of that very
State. On the other hand, if a Contracting Party to the BIT has contributed to endangering its essential
security interest, for the protection of which it has then adopted the challenged measures, those measures
may fail to qualify as “necessary” under Art. XI, since that Party could have pursued some other policy
that would have rendered them unnecessary.

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 The analysis with regard to host-State contribution is whether the State can invoke the non-

precluded measures clause in good faith, given its prior conduct. This question is addressed in the

discussion of good faith below. As explained in that section, host-State contribution will prevent the

host-State from invoking the non-precluded measures clause to the extent that this invocation would

frustrate the object of the treaty. This can be the case for example when an economic emergency is

caused by a policy that itself is in violation of the treaty, such as the wholesale nationalization of an

entire economy leading to a collapse of a country’s foreign currency market. It may be less

compelling where the investor contributed to the situation through an abuse of rights of its own.

c. Elements of the non-precluded measures clauses which are “self-judging”

Non-precluded measures clauses are “self-judging” only to the extent that the treaties contain

language that gives the host-State discretion. The typical way in which treaties give host States

discretion is by stating that the State can take such actions “it considers necessary” to achieve

permissible goals.246 As also explained below, the “self-judging” language may only apply to the

nexus requirement, meaning that the tribunal must independently establish whether the measure

concerned a permissible goal. As discussed in the next section, the “if it considers” language limits

analysis of the nexus requirement to whether the host-State’s judgment was exercised in good faith.

i. “If It Considers” is the main marker of a “self-judging” clause

Case law confirms that non-precluded measures clauses are only “self-judging” if the text provides

the host-State discretion.247 Typical self-judging clauses allow States to take “any action which it

considers necessary” to achieving a permissible goal. The International Court of Justice has

commented that the “considers necessary” language is the hallmark of a self-judging clause.248

ii. Textually “If It Considers” may apply only to the nexus element

Depending on the treaty, the “self-judging” formulation “if it considers” may modify only the nexus

requirement, as opposed to the entire clause.249 This determination will have to be made on a treaty-

by-treaty basis in light of the specific context of the clause and the object and purpose of the
246
See, e.g., Military and Paramilitary Activities in and against Nicaragua (1986), op. cit., at p. 131.
247
See, e.g., Military and Paramilitary Activities in and against Nicaragua (1986), op. cit., at p. 131.
248
See, e.g., Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v. France), judgment, 2008 ICJ 177,
at pp. 226, 230; Military and Paramilitary Activities in and against Nicaragua (1986), op. cit., at p 131.
249
See, e.g., Military and Paramilitary Activities in and against Nicaragua (1986), op cit., at p. 131, (discussing in dicta
“it considers necessary” as a separate, self-judging element of a non-precluded measures clause).
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treaty.250 This means that in treaties containing such a limit “self-judging” clause, the scope, and

permissible objective of the clause still may have to be independently established.

Perhaps surprisingly, this may mean that a tribunal could determine that the States would not

have discretion under such a self-judging clause to determine what are “essential security interests.”

To the extent that the tribunal finds there to be no permissible objective towards which the measures

could be directed, the non-precluded measures plea in the instance of many treaties could fail

despite the fact that it is “self-judging.”

As the survey shows, some treaties combine “self-judging” essential security interest provisions

with non-“self-judging” carve-outs in the same exceptions clause. This juxtaposition, in the same

clause, will be an important contextual factor to be borne in mind in interpreting these treaties. The

sameness of a particular sub-clause dealing with essential security interests between different

treaties therefore may not mean that the provisions have the same scope of application. This result

from the survey, on its own, undercuts the stand-alone importance of the self-judging nature of

essential security clauses.

There are important contextual differences aside from these examples. With respect to treaties

that define essential security interests with respect to armed hostilities or threats to international

peace and security,251 a self-judging non-precluded measures clause might not be applicable as a

defense to measure taken to address a financial crisis or an environmental disaster. A non-precluded

measures clause that is not “self-judging,” but that defines essential security interests in a different

250
Interpreting GATT Article XXI in the context of the broader intentions of the treaty, one article notes that
“arguments regarding the separability of the requirements of a threat to essential security interests and the necessity of
the measure taken to protect those interests are plausible. However, in our view, the determination of whether particular
interests are ‘essential security interests’ is unnecessary in the context of Article XXI”; Akande, “International
adjudication on national security issues: What role for the WTO?” op. cit., at p. 398. The position taken by Akande and
Williams is not uncontroversial in trade law circles. For example, Raj Bhala has submitted that the example of
Sweden’s invocation of Article XXI in support of a quota for global import for certain footwear by reference to
“emergency planning.” Bhala, “National security and international trade law: What the GATT says, and what the
United States does,” op. cit., at p. 272. Raj Bhala reasoned that “[t]hese arguments, however, would stretch beyond the
scope of Article XXI(b), making it a commercial, as well as a national security exception.” Bhala, “National security
and international trade law: What the GATT says, and what the United States does,” op. cit., at p. 273. Another article
similarly stated that “[a]s regards article XXI(b) GATT, for example, the question of whether an essential security
interest is at stake, is not necessarily subject to a state’s self-judging determination, as one could understand the self-
judging element to be limited to the determination of whether a certain measure is ‘necessary’ to protect an essential
security interest.” Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at p.
136.
251
Military and Paramilitary Activities in and against Nicaragua (1986), op cit.
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context may arguably have broader application, depending on the specific context.252 As some

commentary in the WTO context has noted, the “self-judging” nature of an essential security

provision cannot “stretch beyond its scope [. . .] making it a commercial, as well as, a national

security exception.”253 These comparatively smaller contextual factors thus confirm the same result:

The recent focus on the self-judging nature of non-precluded measures clauses therefore may

overstate their practical importance.

Further, and not surprisingly, the self-judging nature of non-precluded measures clauses does not

change their scope. A non-precluded measures clause that by its terms is not applicable to

expropriation or transfer claims is not a defense to such claims simply because it is “self-

judging.”254 The scope of the treaty protections are not affected by the non-precluded measures

clause as such or by its self-judging nature. This possibility that the self-judging nature of the clause

does not affect the scope of the non-precluded measures clause is important in the context of a

possible invocation of an MFN clause by claimants faced with non-precluded measures defenses.

iii. In Some U.S. FTAs it is applied to the entire clause

Some treaties appear expressly to deem the entire non-precluded measures clause self-judging

rather than just one element. The U.S.-Peru TPA is an example of such a provision. It states:

Nothing in this Agreement shall be construed:

(a) to require a Party to furnish or allow access to any information the disclosure of which it determines to
be contrary to its essential security interests; or

(b) to preclude a Party from applying measures that it considers necessary for the fulfillment of its
obligations with respect to the maintenance or restoration of international peace or security, or the
protection of its own essential security interests.[fn.2]

[fn.2] For greater certainty, if a Party invokes Article 22.2 in an arbitral proceeding initiated under Chapter
Ten (Investment) or Chapter Twenty-One (Dispute Settlement), the tribunal or panel hearing the matter
255
shall find that the exception applies.

The footnote in the U.S.-Peru TPA appears to give the host-State discretion to determine “its

own essential security interest.” Given the immediate context of international peace or security in

252
For example, the India-Germany BIT contains a non self-judging essential security clause that also includes
“prevention of diseases and pests in animal or plants” alongside “essential security interests.” This context may define
essential security interests as including more than war time measures depending on the factual circumstances. See supra
at pp. 2–26.
253
Bhala, “National security and international trade law: What the GATT says, and what the United States does,” op.
cit., p. 273.
254
OECD, “The Multilateral Agreement on Investment Draft Consolidated Text,” op. cit., at p. 77.
255
2006 U.S.-Peru TPA, op. cit., Art. 22.2.
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the clause, this may increase the meaning of essential security interests. By its terms, the footnote

also appears to extend the scope of the clause to all arbitration proceedings under Chapter Ten.

But even footnote 2 of the U.S.-Peru TPA may not be an automatic defense for the host-State. It

seems to require that the host-State “invoke” the Article. Such an invocation, like any other exercise

of right under a treaty would have to be in good faith.256 The footnote arguably does not change the

scope of this good faith analysis because the footnote is a clarification “for greater certainty,” not an

additional element.257 The footnote therefore would not change the language in Article 22.2(b) to

“that it considers appropriate” or another kind of nexus requirement. 258 The footnote also does not

allow any interest to become an essential security interest but would require a good faith basis for

such a classification.

iv. Task of the Tribunal

In light of this discussion, a tribunal has three main tasks when interpreting a potentially “self-

judging” essential security clause. First, the tribunal must identify which part of the clause, if any, is

“self-judging.” This task requires textual interpretation of the clause in question. Signal words in

“self-judging” clauses are “measures it considers [. . .]”259 The tribunal then must interpret whether

the signal words modify only one element of the clause or to the clause as a whole.260 As discussed

above, the introduction of “it considers” may only modify the nexus element.

Second, the tribunal must establish that remaining elements of the non-precluded measures

clause have been met.261 As discussed above, if the “self-judgment” allowed the host-State is

applicable only to the nexus element, the permissible objective and scope must be established

256
Vienna Convention on the Law of Treaties, Art. 26; see infra at pp. 51–62.
257
2006 U.S.-Peru TPA, op. cit., Art. 22.2, fn. 2.
258
1982 U.S.-Egypt BIT, op. cit., Art. X(1).
259
See, e.g., Djibouti v. France, op. cit., judgment, at p. 230; Military and Paramilitary Activities in and against
Nicaragua (1986), op cit., at p. 131.
260
As discussed above, this had led to some debate in the trade context. See supra at pp. 27–29. It is important to bear
in mind the observation of the drafters of the GATT exception these articles discuss that “[w]e recognized that there
was a danger of having too wide an exception and we could not put into the Charter, simply by saying: ‘by any Member
of measures relating to security interests,’ because that would permit anything under the sun.” GATT analytical Index,
op. cit., at p. 600. To the extent a similar intention is apparent from the treaty examined by a tribunal, this may affect the
tribunal’s interpretation on this point.
261
Compare Cann, “Creating standards and accountability for the use of the WTO security exception: Reducing the role
of power-based relations and establishing a new balance between sovereignty and multilaterialism,” op. cit., at p. 425
(noting in the WTO context that “[s]ince Article XXI is not totally self-defining, Hahn suggests that States should be
required to demonstrate that they acted for the protection of their essential security interests and to supply sufficient
facts to exclude improper motivation and show that the objective prerequisites under XXI(b)(i)–(iii) have been
met”)(emphasis added).
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independently by the tribunal. In that case, the invocation of the clause by the host-State will not be

given additional deference with regard to the permissible objective.262 This can defeat invocation of

even a self-judging non-precluded measures clause prior to the self-judging nexus element

becoming relevant to the analysis.

Third, the tribunal must establish whether the “self-judging” elements of the non-precluded

measures clause were invoked in good faith.263 Depending on the wording of the clause, a good

faith analysis must establish that the clause was in fact was honestly invoked, i.e., that the State

actually considered the measures to be necessary rather than expedient.264 A good faith analysis also

must establish that the judgment of necessity itself was reasonable in the sense that it is not abusive

of a treaty right.265 This again requires substantive analysis by the tribunal. This analysis can lead to

the conclusion that the clause was not properly invoked by the host-State.

These tasks of the tribunal demonstrate that the term “self-judging” may be misleading.

Tribunals still must adjudge application of these clauses. In some instances, this may mean that

important elements of the clause must be independently established. In fact, as detailed above, more

permissive wording of the clause that is not considered “self-judging” may allow host States greater

freedom of action than narrow self-judging clauses. The preliminary conclusion therefore is that

each non-precluded measures clause has to be interpreted as it stands, rather than by reference to

catch phrases like “self-judging” or not self-judging, or by wholesale substitution of the agreed

upon definitions of the non-precluded measures with a customary international law standard.

III. Good faith invocation of the self-judging element of non-precluded measures clauses

262
See Cann, “Creating standards and accountability for the use of the WTO security exception: Reducing the role of
power-based relations and establishing a new balance between sovereignty and multilateralism,” op. cit., at p. 425; see
also Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at p. 136
(“international Courts and Tribunals should first isolate the elements of a treaty provision that is self-judging”).
263
See, e.g., Djibouti v. France, op. cit., judgment, at pp. 226, 229, 230; compare Djibouti v. France, op. cit., separate
opinion of Judge Keith, at p. 278.
264
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 278; Cann, “Creating standards and accountability
for the use of the WTO security exception: Reducing the role of power-based relations and establishing a new balance
between sovereignty and multilateralism,” op. cit., at pp. 425, 454; Bhala, “National security and international trade
law: What the GATT says, and what the United States does,” op. cit., at p. 275.
265
See, e.g., Djibouti v. France, op. cit., judgment, at p. 226, 230; Djibouti v. France, op. cit., separate opinion of Judge
Keith, at p. 278–279; Akande “International adjudication on national security issues: What role for the WTO?” op. cit.,
at p. 390; Cann, “Creating standards and accountability for the use of the WTO security exception: Reducing the role of
power-based relations and establishing a new balance between sovereignty and multilateralism,” op. cit., at p. 425;
Bhala, “National security and international trade law: What the GATT says, and what the United States does,” op. cit.,
at pp. 275–276 (1998); Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit.,
at pp. 120–140.
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There is broad agreement that the self-judging elements of a non-precluded measures clause are

subject to review whether they were invoked in good faith by a tribunal.266 This requirement arises

directly out of Article 26 of the Vienna Convention on the Law of Treaties. Article 26 of the Vienna

Convention requires that “[e]very treaty in force is binding upon the parties to it and must be

performed by them in good faith.”267

A good faith analysis cannot occur in a vacuum. Rather, it must be applied to the actual wording

of the clause. This means in practice that it may not be sufficient that a measure broadly was taken

“in good faith” to meet the requirements of a specific non-precluded measures clause. For instance,

where the clause requires that the host-State considered the measure necessary to achieve a

permissible objective, it may not suffice that the measure was considered merely prudent or

precautionary rather than necessary by the host-State government. A good faith analysis also must

take into account the broader context of the clause and the object and purpose of the treaty.

Most good faith analyses will have two elements in common. First, the host-State must invoke

the clause with honesty-in-fact. Second, the invocation of the clause must meet a reasonableness

requirement to safeguard that invocation of the clause does not frustrate the object of the treaty.

Depending on the context and object and purpose of the treaty, both elements of the good faith

analysis will differ and provide the host-State with broader or narrower freedom of action.

Given the breadth of review available even of a “self-judging” non-precluded measures clause—

and the difference that review will take from treaty to treaty—the designation that a clause is self-

judging is going to be less helpful than the literature would suggest.

a. Honesty in fact

The first element of good faith is honesty-in-fact. This element has led to recent disagreement in the

Case Concerning Certain Questions of Mutual Assistance in Criminal Matters.268 In that case, the

International Court of Justice was called upon to examine, among other issues, whether France’s

denial of a legal assistance request was in breach of the mutual assistance convention in force

266
See, e.g., Sempra Energy International v. Argentina, op. cit., award (September 18, 2007), at ¶ 366.
267
Vienna Convention on the Law of Treaties, Art. 26; Djibouti v. France, op. cit., judgment, at p. 229 (“this exercise of
discretion is still subject to the obligation of good faith codified in Article 26 of the 1969 Vienna Convention on the
Law of Treaties”); see also Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 279.
268
Djibouti v. France, op. cit., judgment, at pp. 226, 230; Djibouti v. France, op. cit., separate opinion of Judge Keith,
at p. 279.
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between both countries.269 The underlying investigation concerned the death of a French judge in

Djibouti, deemed to be a suicide by the Djiboutian authorities.270 A French investigation into the

matter was later opened, which implicated high-ranking Djiboutian government officials in the

judge’s death.271 Djibouti decided to reopen its own investigation at that point in time and requested

the French file by means of a letter rogatory.272 The French courts denied the request, noting that

“transmission of the file was considered to be ‘contrary to the essential interests of France,’ in that

the file contained declassified ‘defence secret’ documents, together with information and witness

statements in respect of another case in progress.”273 The underlying French order explained that

“[h]anding over our record would entail indirectly delivering French intelligence service documents

to a foreign political authority.”274 The Court noted that “[i]t was only during the written and oral

pleadings of France that the Court has been informed that the intelligence service documents and

information permeated the entire file.”275

France’s denial of the request relied on Article 2(c) of the Mutual Assistance Convention, which

states in relevant part that “the requested State may refuse a request for mutual assistance if it

considers that execution of the request is likely to prejudice [the] sovereignty, [. . .] security, [. . .]

ordre public or other [. . .] essential interests [of France].”276 The Court held that invocation of the

“self-judging” clause was subject to a good faith review.277 The Court held that “[t]his requires it to

be shown that the reasons for refusal to execute the letter rogatory fell within those allowed for in

Article 2.”278 The Court’s judgment accepted that the reasons given by the judge, after consideration

of the statements made in the international proceedings, “do fall within the scope of Article 2(c)”

and accepted France’s invocation of that Article on this basis.279 As one commentary noted, while

the “Court drew a parallel between the concept of good faith and the concept of abuse of right

269
Djibouti v. France, op. cit., judgment, at pp. 220–221.
270
Djibouti v. France, op. cit., judgment, at pp. 187–188.
271
Djibouti v. France, op. cit., judgment, at pp. 187–189.
272
Djibouti v. France, op. cit., judgment, at pp. 189–190.
273
Djibouti v. France, op. cit., judgment, at pp. 191–192, 226, 230.
274
Djibouti v. France, op. cit., judgment, at pp. 226, 230.
275
Djibouti v. France, op. cit., judgment, at pp. 226, 230.
276
Djibouti v. France, op. cit., judgment, at p. 192 (quoting the text of the Article from a February 2005 French order
refusing the request).
277
Djibouti v. France, op. cit., judgment, at p. 229.
278
Djibouti v. France, op. cit., judgment, at p. 229.
279
Djibouti v. France, op. cit., judgment, at p. 230.
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discussed in earlier decisions of the [PCIJ],” “[w]hat precisely this standard entailed, remained,

however, largely unresolved in Djibouti v. France.”280

Judge Keith, writing a separate opinion, disagreed with the Court’s conclusion on the invocation

of Article 2(c). The basis for the disagreement fundamentally appears to be driven by a different

appreciation of the evidence: “[T]he judge does not say, as counsel for France does, consistently

with France’s Counter-Memorial, that the entire file in those volumes is rife (irrigué) with the

sensitive information; but that counsel frankly informed the Court that he had not seen the notes in

question.”281 This appreciation of the evidence was partly informed by an independent requirement

set out in the treaty requiring that “a refusing State to give reasons to the requesting State.”282

Judge Keith also proposes a more detailed analysis of what a good faith review entails with

regard to honesty-in-fact: The reasons given by the French judge have to be considered “against the

principles of good faith, abuse of right and détournement de pouvoir (excess of power).”283 Judge

Keith reasoned, with regard to honesty-in-fact, that there must have been no extraneous reasons for

a denial of the request.284 He found that this principle appears not to have been abided on his

understanding of the evidentiary record.285

Because the Court itself does not lay out a detailed analysis of its own approach to the good faith

review it performed, it is difficult to determine how much disagreement as to the applicable good

faith analysis of Article 2(c) there truly was between the Court and Judge Keith. Under the

circumstances, it may be prudent to accept Judge Keith’s assertion that his treatment of good faith

was to “supplement the Court’s discussion of the law relevant to the exercise of such broadly

280
Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at p. 116. Judge
Tomka, in a beautifully crafted remark best left in the original French, pointed to the triviality of the question presented
to the court as one possible for the truncated legal development:
On peut même se demander s’il était vraiment nécessaire de saisir l’organe judiciaire principal des Nations
Unies afin qu’il se prononce, après plus de quatre mois de délibérations, sur le refus opposé par un juge
d’instruction parisien à la demande, présentée sous la forme d’une commission rogatoire internationale, de
transmettre les copies d’un dossier qu’elle instruit à son omologue djiboutien. A chacun de juger.
281
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 281; see also Schill, “‘If the state considers’: Self-
judging clauses in international dispute settlement,” op. cit., at p. 118 (“[i]mplicitly, it appears that Judge Keith’s
Declaration that this failure could not be cured by the post hoc reasons for this approach put forward by France in her
written and oral pleadings”).
282
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 282.
283
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 279.
284
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 280.
285
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 280.
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worded powers” rather than to disagree with the Court.286 Both the judgment and the separate

opinion at least have in common that there must be a showing, not a mere assertion, that the reasons

given fall within the scope of the “self-judging” clause.287 Notably, the treaty did not contain a

stringent nexus requirement, but required only that the denial “is likely to prejudice” security, ordre

public, etc., rather than requiring for example that the denying State consider it necessary to deny

the request to protect these interests.288 There would thus be more limited ground for disagreement

on legal analysis than there otherwise might have been.

Because of this relatively limited explication of the relevant analysis, it is useful to consider the

stated basis on which the ICJ decision was premised, namely the role of good faith in the

performance of treaty obligations. Discussing the role of good faith in the performance of treaty

obligations, Bin Cheng, drawing on precedent of the PCIJ, as well as arbitral decisions of mixed

claims commissions and the Permanent Court of Arbitration, concludes for example that

“[p]erformance of a treaty obligation in good faith means carrying out the substance of this mutual

understanding honestly and loyally.”289 Such honesty-in-fact would require at the very least the

State itself had made the subjective judgment that a measure was in fact necessary to achieve the

permissive objective in the treaty.290

Recently, this requirement was summarized as follows by the ICSID tribunal in the Phoenix

Action arbitration:

The principle of good faith has long been recognized in public international law, as it is also in all national
legal systems. This principle requires parties “to deal honestly and fairly with each other, to represent their

286
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 279.
287
See Djibouti v. France, op. cit., judgment.
288
Djibouti v. France, op. cit., judgment, at p. 192 (quoting the text of the Article from a February 2005 French order
refusing the request).
289
Bin Cheng, General principles of law as applied by international courts and tribunals (New York: Cambridge
University Press, 1953), at p. 115.
290
Cheng, General principles of law as applied by international courts and tribunals, op. cit., at p. 159:
A certain amount of exaggeration and even misrepresentation of facts on the part of the individuals whose
claim their State espouses is not infrequent and does not of itself invalidate the claim. But when it is
alleged that an international tribunal has been “misled by fraud and collusion on the part of witnesses and
suppression of evidence on the part of some them,’ “no tribunal worthy of the name or of any respect may
allow its decision to stand if such allegations are well founded.”

The evidentiary issue in those cases will be whether the pretense of its own consideration of necessity of a measure
towards a permissible objective lies more on the spectrum of appearing an exaggeration (at which point the self-judging
clause may still be within its proper domain) or whether it was truly made knowing of its actual falsity (at which point
the self-judging clause could not be apply).
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 motives and purposes truthfully, and to refrain from taking unfair advantage . . .” This principle governs
the relations between States, but also the legal rights and duties of those seeking to assert an international
291
claim under a treaty.

This holding in Phoenix Action notably also explicated further the concept of abuse of right292 made

central to the review of “self-judging” clauses by the Case Concerning Certain Questions of Mutual

Assistance in Criminal Matters.293

This requirement would most clearly be violated if internal government documents would reveal

that its actions were taken on a pretense.294 Such a revelation would mean that the measures were in

fact not directed towards the underlying permissible objectives, but towards completely different

objectives.295 If this pretense is sufficiently established, the invocation of the non-precluded

measures clause would fail the honesty-in-fact prong of the good faith analysis.

A more subtle issue arises when the investor submits statements by government officials or

lawmakers that the measures taken were prudential or precautionary. In other words, the

government took the actions for a permissive end, but might not have believed them to meet the bar

of necessity.296 In those instances, the government may be precluded from invoking the non-

precluded measures clause because of its own inconsistent actions or justifications for its measures,

depending on the respective circumstances and the treaty language at bar.297 Given that some

291
Phoenix Action Ltd v. Czech Republic, ICSID Case No. ARB/06/5; IIC 367 (2009), award (April 9, 2009), at ¶ 107.
292
Phoenix Action Ltd v. Czech Republic, op. cit., award, (April 9, 2009), at ¶ 143 (“All the elements analyzed lead to
the same conclusion of an abuse of rights. The abuse here could be called a ‘détournement de procédure,’ consisting in
the Claimant’s creation of a legal fiction in order to gain access to an international arbitration procedure to which it was
not entitled. As stated in Inceysa, ‘(i)n the contractual field, good faith means absence of deceit and artifice during the
negotiation and execution of instruments that gave rise to the investment.’”)
293
See Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at p. 116.
294
It appears that Judge Keith’s appreciation of the evidence in the Djibouti case came close to finding such a pretense
whereas the Court did not. The key difference between both approaches is the weight they accorded to the explanation
provided by the French government in the international legal proceedings, supplementing the underlying determination.
See supra at pp. 52–54.
295
In the trade context, this has led to the correct observation that permitting invocation of a security clause could easily
transform into a “commercial exception.” Bhala, “National security and international trade law: What the GATT says,
and what the United States does,” op. cit, at p. 273. As outlined above, this was exactly not the intention of the drafters
in adopting the provision in question. See supra at pp. 27–29. This is therefore an important element of the honesty-in-
fact analysis.
296
Notably, this was not the issue in Djibouti. If it had been an issue in the Djibouti case, the insistence in Judge Keith’s
separate opinion that the permissible reasons for invocation of a self-judging clause in fact be the only reasons for its
invocation may gain additional strength depending on the specific treaty provision, its context, the object and purpose of
the treaty–and perhaps most importantly, the additional reasons motivating the invocation of the treaty provision and
their respective weight. Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 280.
297
See, e.g., Cheng, General principles of law as applied by international courts and tribunals op. cit., at p. 144:
Thus, it has been held that a State cannot be heard to repudiate liability for a collision after its authorities
on the spot had at the time admitted liability and sought throughout to make the most advantageous
arrangements for the Government under the circumstances. Again, if a State, having been fully informed
of the circumstances, has accepted a person’s claim to the ownership of certain property and entered into
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information on government policy even of least developed nations is currently available in the

electronic sources and through subscription services, the potential for estoppel may lead to delicate

issues of proof. These issues will have to be resolved on a case-by-case basis. They cannot be

dismissed simply by reference to the fact that the clause is self-judging: The litigation position

advanced by the host-State may have to have a reasonable basis in facts on the ground.298

Where such statements were made, tribunals will likely encounter thorny evidentiary issues, as

investors faced with a non-precluded measures defense may make document disclosure requests for

the legislative history of the relevant measures. Many of these statements may fall within

parliamentary or executive privilege.299 Further, it may be close to impossible for many poorer host

States fully to catalogue every statement made by government officials. On the other hand, the host-

State has placed the issue of its judgment that the measure was necessary squarely in play by the

invocation of the non-precluded measures clause. These competing interests in the evidentiary and

document exchange processes will have to be carefully considered by tribunals.300

Even the honesty-in-fact prong of the good-faith analysis is thus not without its traps. Notably, it

encounters issues of proof that would not arise in the context of a nexus element which merely

requires that measures are directed towards a permissible goal as the state of mind of the host-State

government adopting the measure could meet this requirement even if the permissible objective was

not the only, or may be even not the primary, intended target of the measure. The “self-judging”

nature of the clause therefore in fact may not give the clause the full effectiveness that has

sometimes been attributed to it.

negotiations with him for its purchase, it becomes “very difficult, if not impossible” for that State
subsequently to allege that he had no title at the time.

See also Case concerning the Legal Status of the South-Eastern Territory of Greenland (Norway v. Denmark), PCIJ
(August 3, 1932), pp. 68–69, available at http://www.worldcourts.com/pcij/eng/decisions/1932.08.03_greenland.htm
(last visited April 8, 2011).
298
As the Djibouti case shows, there can be reasonable disagreement what constituted a reasonable basis in the facts on
the ground. The Court accepted the submissions of counsel in the case to supplement the reasons evident from the
contemporaneous documentation. Judge Keith, however, did not. See supra at pp. 52–54. One therefore should
generalize what kind of basis will be required in any given case, given that reasonable minds can differ what is required
even in a specific fact scenario.
299
International Bar Association, “IBA rules on the taking of evidence,” (May 29, 2010) Art. 9(2)(f) available at
http://www.ibanet.org/Document/Default.aspx?DocumentUid=68336C49-4106-46BF-A1C6-A8F0880444DC (last
visited April 8, 2011)(“ The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from
evidence or production any Document, statement, oral testimony or inspection for any of the following reasons: . . .
grounds of special political or institutional sensitivity (including evidence that has been classified as secret by a
government or a public international institution) that the Arbitral Tribunal determines to be compelling”).
300
On relevant evidentiary issues see generally Robert Piertrowski, “Evidence in international arbitration,” 22
Arbitration International 373 (2006).
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b. Reasonableness of self-judgment

A good faith analysis further has to take account of the reasonableness of the position espoused by

the host-State. The Court’s decision in the Case Concerning Certain Questions of Mutual

Assistance in Criminal Matters found “that those reasons given by” France “do fall within the scope

of Article 2(c).”301 Judge Keith’s separate opinion” supplemented” the Court’s sparse legal analysis,

noting that the principle of good faith “obliges the Parties [to a treaty] to apply it in a reasonable

way and in such a manner that its purpose can be realized.”302 As Judge Keith explains, this

requirement is consistent with the commentary of the International Law Commission on Article 26

of the Vienna Convention on the Law of Treaties codifying the obligation to perform treaties in

good faith.303

The extent of its review of the measure will depend on the overall context in which the non-

precluded measures clause stands as well as the object and purpose of the treaty.304 The objective of

this second part of the good faith analysis, formulated by the ILC in the context of pacta sunt

servanda, is to secure “that obligations must not be evaded by a merely literal application of the

clauses.”305 As the International Law Commission explained that “it was clearly implicit” in this

conception of good faith that “a party must abstain from acts calculated to frustrate the object and

purpose of the treaty.”306

This second prong has been developed further in the abuse-of-rights context. As Bin Cheng

summarized,

the exercise of [a] right in such a manner as to prejudice the interests of the other contracting party is
unreasonable and considered inconsistent with the bona fide execution of the treaty obligation, and a
breach of the treaty. In this way, the principle of good faith establishes an interdependence between the
307
rights of a State and its obligations.

The Phoenix Action tribunal recently confirmed that this principle applies to the rights and

obligations of international investors under international investment treaties. Phoenix Action

301
See Djibouti v. France, op. cit., judgment, at p. 230.
302
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 279 (quoting the Gabcikovo-Nagymaros decision).
303
Djibouti v. France, op. cit., separate opinion of Judge Keith, at p. 279.
304
Djibouti v. France, op. cit., separate opinion of Judge Keith, at pp. 279–280 (analyzing the “general purpose” of the
treaty through a contextual analysis of all its relevant articles).
305
International Law Commission, “Draft Articles on the Law of Treaties with commentaries,” (1966), available at
http://untreaty.un.org/ilc/texts/instruments/english/commentaries/1_1_1966.pdf (last visited April 8, 2011), at p. 211.
306
International Law Commission, “Draft Articles on the Law of Treaties with commentaries,” at p. 211.
307
Cheng, General principles of law as applied by international courts and tribunals, op. cit., at p. 125.
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similarly confirmed that “[t]here is no right, however well established, which could not, in some

circumstances, be refused recognition on the ground that it has been abused.”308

In the trade context, authors have noted the same concern with regard to the invocation of “self-

judging” non-precluded measures clauses. One article notes as persuasive authority for the

interpretation of self-judging essential security clause of the GATT jurisprudence of the Appellate

Body requiring that “rights must be exercised reasonably and in a manner which is appropriate for

the purpose of that right.”309 Other commentary went further:

implicit in clauses (i), (ii), and (iii), and in the words “necessary,” “protection,” and “essential security
interest,” must be the concept of a credible threat from these dangers. Simply “crying wolf” will not do,
because Article XXI could not have been designed to protect a hyper-sensitive government any more than
many standards of care in tort law do not protect the hyper-sensitive plaintiff. Rather, the test should be an
objective one, namely, whether a “reasonable” government faced with the same circumstances would
310
invoke Article XXI.”

This scholarship evidences the recognition that there exists an objective component to the good

faith analysis of “self-judging” clauses. Differences in the advocated scope of this analysis aside, a

similar exercise may be appropriate in the investment treaty context depending on the language of

the treaty in question.

Following the abuse-of-right approach, an analysis of the invocation of a self-judging non-

precluded measures clause could look in the first instance to three kinds of concerns. First, does the

invocation of the non-precluded measures clause frustrate the object and purpose of the treaty in

contravention of Article 26 of the Vienna Convention?311 Second, does the invocation of the non-

precluded measures clause evade obligations under the treaty solely on account of a literal

application of its terms?312 Third, does the invocation of the non-precluded measures clause

unreasonably prejudice the rights of investors under the treaty?313

308
Phoenix Action Ltd v. Czech Republic, op. cit., award, (April 9, 2009), at ¶ 108.
309
Akande, “International adjudication on national security issues: What role for the WTO?” op. cit., at p. 392.
310
Bhala, “National security and international trade law: What the GATT says, and what the United States does,” op.
cit., at p. 279.
311
International Law Commission, “Draft Articles on the Law of Treaties with commentaries,” at p. 211.
312
International Law Commission, “Draft Articles on the Law of Treaties with commentaries,” at p. 211.
313
See, e.g., Cann, “Creating standards and accountability for the use of the WTO security exception: Reducing the role
of power-based relations and establishing a new balance between sovereignty and multilateralism,” op. cit., at pp.439–
452 (discussing factors to be taken into account in a balancing test of interests of the state imposing a measure and its
counter-party). We note in this context that the position of the investor vis-à-vis the host state of course is not
“contractual” in nature given the lack of privity between the investor and the host state. A basis for responsibility
therefore may appropriately take into account delictual or “quasi-delictual” considerations, i.e., did unreasonable actions
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 The invocation of the non-precluded measures clause, self-judging or otherwise, must be

consistent with the treaty as a whole. It cannot frustrate its object and purpose.314 An invocation of a

non-precluded measures clause, no matter how broadly formulated, that would render treaty

protections a nullity for all practical intents and purposes therefore cannot be permitted. This means

that a tribunal, even in the context of a self-judging clause, must ascertain whether it would be

reasonable in light of the treaty as a whole that there be no liability for treaty breach on the basis of

the terms of the non-precluded measures provision under the factual circumstances of the case. In

other words, the non-precluded measures clause should not be allowed to deprive the entirety of the

treaty of meaning.

The invocation of the non-precluded measures clause should also have more substance than

merely the words used by the drafters.315 As the Vienna Convention recognizes, literal applications

of treaty clauses in a vacuum can—but must not be allowed to—lead to absurd results.316 In cases in

which the treaty as a whole would not be frustrated by the invocation of the non-precluded

measures clause, but where such an invocation would seem absurd given what the treaty otherwise

achieves, this conception of an abuse of right may further defeat invocation of a self-judging non-

precluded measures clause. This analysis differs from an actual finding that the elements of the

clause would have been met even it were not self-judging—but it would have to be judged to an

extent against the reasonable judgment of a third state in similar circumstances.

Perhaps the most useful way to consider abuse of rights is as a balancing test.317 The

reasonableness of the exercise of a host-State’s rights under a self-judging non-precluded measures

clause must be compared with the corresponding loss of rights by the investor.318 To the extent that

the reasonableness of the invocation of the clause, in light of the treaty as a whole and considering

the overall factual circumstances outweighs that loss, the good faith analysis is satisfied. To the

on the part of the state cause harm to the investor. See, e.g., François Terré et al., Droit Civil, Les obligations Paris:
Dalloz), p. 711.
314
International Law Commission, “Draft Articles on the Law of Treaties with commentaries,” at p. 211; see also
Schill, “International investment law and the host state’s power to handle economic crises,” op. cit., at p. 137.
315
International Law Commission, “Draft Articles on the Law of Treaties with commentaries,” at p. 211.
316
Vienna Convention on the Law of Treaties, Art. 32(b).
317
See Schill, “International investment law and the host state’s power to handle economic crises,” op. cit., at pp. 123–
124 (discussing the use of a “proportionality test” in LG&E).
318
See Cheng, General principles of law as applied by international courts and tribunals, op. cit., at p. 125.
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extent it is not, however, a tribunal is at liberty to reject the invocation of the self-judging non-

precluded measures clause.

This balancing test must take into account the relative contributions of all relevant actors to the

underlying event to which the measures respond. Because it is part of a balancing test, host-State

contribution to a situation to which the non-precluded measures clause facially permits the host-

State to respond is not an on/off switch. Rather, a tribunal would have to understand what the

contribution in fact was, how the international community reacted to it, how investors reacted to it,

whether the international investor also contributed to the situation and so on.

The contribution required to tip the balance will again depend on the terms of the treaty as a

whole as well as the underlying factual circumstances. Fundamentally, unless the treaty clearly

provides differently, non-precluded measures clauses should be available in the right factual

circumstances even where there has been some contribution by the host State. Similarly, however,

the measures adopted in these circumstances will be treated differently than measures adopted to

respond to a situation that is completely beyond the control of the host-State: As it were, the host-

State has already placed some weights in the balance.

An alternative test for the reasonableness of self-judgment, derived from administrative law

sources, was recently suggested by Stephan Schill and Robyn Briese:

As regards the self-judging element of a treaty clause, by contrast, an international Court or Tribunal
should, similar to the review of discretionary decision-making in domestic administrative law, primarily
apply procedural grounds of review as regards the invocation of a self-judging clause. While the Court or
Tribunal is thus not authorized to “step into the shoes” of the state invoking a self-judging clause and
replace the state’s own determination of the self-judging elements in question, it can review whether the
state in question misused its discretionary powers, i.e., whether the factual basis of its decision was
adequate and properly investigated, whether the appreciation of the governing legal framework was
correct, whether the state abided by the proper procedure and whether it was guided in the exercise of its
discretion by relevant and pertinent considerations in view of the purpose of the treaty in question. For the
purpose of such review, it will also be important that the state invoking a self-judging clause provides the
319
reasons for doing so to the other Contracting Parties.

Such an analysis on its face would attempt to value far more strongly an honesty-in-fact element

than a reasonableness of invocation of the non-precluded measures clause. Even so, how it would

do so and weigh whether the State “was guided in the exercise of its discretion by relevant and

319
Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at p. 137.
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pertinent considerations in view of the purpose of the treaty in question” remains a difficult issue in

practical application.320

Which approach is more appropriately applied in any given case—and how they may differ once

applied—again will depend not on a deeper understanding of legal doctrine. Rather, it should

depend on the interpretation of the words used in the treaty, viewed in their specific context and

interpreted to give effect to the treaty’s object and purpose.

It is noteworthy, no matter what approach is taken, that some non-precluded measures clauses

surveyed above expressly address some of these very considerations in the context of clauses that

do not contain the “self-judging formula” of “it considers.” These formulations may help bridge the

gap between the different possible approaches that could be applied to any given treaty provision.

Notwithstanding paragraph (1) of this Article nothing in this Agreement precludes the host Contracting
Party from taking action for the protection of its essential security interests or in circumstances of extreme
321
emergency in accordance with its laws normally and reasonably applied on a non discriminatory basis.

The clause does not contain a nexus requirement that the measure be “necessary.” Rather, the clause

requires that an action be applied lawfully, and in a non discriminatory and reasonable fashion.

These concerns, of course, resemble the factors a good faith analysis of a “self-judging” clause

would have to weigh. A benefit of more direct draftsmanship, however, is that the treaty parties

make clear at the outset what factors were most important to them as part of the inclusion of a non-

precluded measure clause in the treaty. Given the necessarily amorphous nature of the good faith

analysis322 of so-called “self-judging” non-precluded measures clauses, such an approach may on

the whole lead to greater predictability and as such be preferable.

c. Conclusion

The reach of the good faith analysis makes clear: Self-judging non-precluded measures clauses do

not provide host States with carte blanche. They still require the close examination of the

circumstances of invocation of the clause. Authorities support that, with respect to many clauses at

least; this analysis must satisfy both a subjective element and an objective element. The clause must

320
Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at p. 137 (emphasis
added).
321
1996 India-Kazakhstan BIT, op. cit., at Art. 12 (2).
322
See Schill, “‘If the state considers’: Self-judging clauses in international dispute settlement,” op. cit., at 122 (noting
in the context of good faith reviews of self-judgment that “it is clear that good faith is a very general legal concept”).
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have been invoked with honesty-in-fact and the clause reasonably should preclude liability under

the treaty read as whole given the factual circumstances. Self-judging non-precluded measures

clauses thus do not differ from any other affirmative defense or treaty provision to the extent that

they are sometimes understood to. They are not a “magic bullet” in the arsenal of State defendants.

Rather, they are a tool, included in treaties by conscientious treaty parties to create pressure valves

for emergency measures when they are needed. In some instances, these measures will be more

readily available than others. But this is only the case to the extent the treaty as a whole supports

such a reading—avoiding surprise defenses in otherwise extraordinarily broadly protective treaties.

In short, because of the good faith analysis, such clauses protect the reasonable expectations of host

states and investors alike of the protections available to investors and the circumstances in which

they must be placed on hold.

Conclusion

“Self-judging” non-precluded measures clauses are not showstoppers. An invocation of such

clauses frequently will fall within the substantive jurisdiction of an investment tribunal. A merits

analysis can reveal that “self-judgment” may apply only to some elements of the non-precluded

measures clause and not the clause as a whole. Further, “self-judgment” has to be exercised in good

faith in accordance with many treaties containing such clauses, meaning that it must be honest in

fact and reasonable within the scope of the treaty as a whole.

To understand non-precluded measures clauses and their operation therefore requires more than

simply referring to a single sub-clause. These clauses can be extraordinarily targeted policy

instruments. Treaty drafters in many instances have understood this: Many “self-judging” non-

precluded measures clauses outside of the U.S. are becoming ever more carefully crafted to create

transparency and certainty for host states and investors alike in what circumstances the clause will

apply. It will be important for the investment arbitration community to appreciate the intentions of

treaty drafters on this point if awards are to be made on the basis of sound analysis rather than

sound bite. As this article seeks to demonstrate, “self-judging” cannot operate automatically in the

fashion of a catch phrase because the underlying provisions to which it applies may operate

differently from treaty to treaty.

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